GM stock wavers at beginning of first full week

Associated Press

DETROIT

General Motors stock gyrated between losses and gains Monday as it started its first full week of trading as a reborn company.

Analysts said the reason is a combination of hedge funds taking profits and other investors jumping in as the price dips, and they expect volatility to last for several more days.

Stock in GM dropped as much as 45 cents to $33.81 as trading opened, but it rebounded to a gain, then continued to move in and out of positive territory. By late afternoon, the stock seemed to settle in around the break-even point from Monday’s opening of $34.26. Volume was 28 million shares, far below the more than 400 million trades in GM stock Thursday.

The stock movement comes just two business days after General Motors Co. pulled off an IPO worth $15.8 billion, signaling the surprising resurrection of an American corporate icon that collapsed into bankruptcy protection and was rescued with a $50 billion bailout from U.S. taxpayers.

Volatility likely will continue for at least a few more days because stock markets have been unstable of late and as hedge funds continue to take profits and other traders search for bargains, said Joe Phillippi, a former Wall Street analyst who is now president of AutoTrends Consulting in Short Hills, N.J. He also said investors could be buying with the expectation of a pop in the price because GM should make its way back into the Standard and Poor’s 500 i ndex shortly. Membership in the index is important because many mutual funds buy shares based on it.

“The hedge funds are obviously big players. They’re flipping. They used their muscle to get big, strong allocations” in the IPO, Phillippi said. “You may very well have a lot of portfolio managers buying the stock when it dips, figuring that it’s going to be put back into the S&P 500 soon.”

On Monday, Standard and Poor’s began covering the new GM stock by recommending that investors hold it. Analyst Efraim Levy set a 12-month price target of $36 and wrote that he expects earnings per share of $2.78 in 2010 and $3.62 in 2011. GM earned $2.62 per share through the first three quarters of this year.