What's Bad for GM Is Bad for the Market

No M&A Boost

The Treasuries market saw a minor rally Tuesday. The 10-year-note yield dropped three basis points to 5.20%, while the 2-year note yield dropped about 1.7 basis points to 5.24% amid a $22 billion auction of 2-year notes.

Elsewhere, DuPont's (DD Quote) shares fell 2.62% on news that French telecom company Vivendi (V Quote) sold a 1.8% stake in the company.

In other corporate news, Univision's (UVN Quote) stock gained 6.15% after it finally agreed to sell to a group of private equity investors. Republic Bancorp's (RBNC Quote) shares climbed 18.26% on news the company will be acquired by Citizens Banking (CBCF Quote), which fell 8.8%.

While many suggested that the heavy doses of M&A volume Monday buoyed stocks, Tuesday's deal-making had no such broad effect (real or perceived). Perhaps the deluge of big M&A deals and the heavy slate of initial public offerings on tap was seen as overkill.

The bears took the reins Tuesday as another round of round of stronger-than-expected economic news was taken as a sign of more rate hikes to come. Existing-home sales reportedly fell 1.2% to 6.67 million in May, but that was less than the 1.8% fall that economists expected. The report comes a day after new-home sales showed a 4.6% gain in May. Also Tuesday, the Conference Board's index of consumer confidence read 105.7 for June, higher than the 103.1 expected reading.

The bond and equities markets may, in part, be reflecting uncertainty about the FOMC's two-day meeting this week, which begins Wednesday. Market participants from all sides are talking about the possibility of a 50-basis-point rate hike. But invariably, the following sentence is always: "But that isn't going to happen."

We'll see. It is probably more likely than a 40% rally in GM's stock would have seemed in January when investors were on bankruptcy watch.