May 28, 2009 (FinancialWire) (By Philip Holmes) — Stocks ended lower on Wednesday as investors worried about the cost of credit and a looming GM (NYSE: GM) bankruptcy. Plus, are all the latest share offerings soaking up investment capital and preventing a more permanent market recovery?

The Dow Jones industrial ended the day at 8,300.02, down 173.47 points, while the Standard & Poor’s 500 index dropped 17.27 points, for a 893.06 finish. The Nasdaq composite index lost 19.35 points on the trading session, to close at 1,731.08.

Will the recent spike in government borrowing make already scarce credit more expensive for consumers and businesses? It might, if today’s trend in Treasuries continues. Uncle Sugar sold $35 billion of five-year notes, sending treasury yields sharply higher and prices lower.

Remember the early eighties? Let’s not, but ponder the impact on economic recovery if Treasuries start to offer good returns. With unemployment high and fewer consumers out there with really good credit scores we could soon usher in the era of the 35% car loan and the 15% mortgage. It’ll act like a weed whacker on all those little green shoots.

GM might not even be around to offer low-low 20% APR car loans. The struggling automaker failed to convince its bondholders to accept its debt-for-equity exchange offer. GM was trying to swap around $27.2 billion of notes. The company now has until May 31 to gets its finances in order or file for Chapter 11 protection.

Have you noticed all the recent stock offerings closing? Banks, biopharmaceutical firms, industrial firms - just about everyone has gotten into the act. BusinessWeek’s David Henry says that $200 billion of new cash has flowed into the market in the past couple of months. But with so much of it going to buy newly-issued stock, not enough is being used to bid up the price of issued shares.

Hence, your 401k is still bringing tears to your eyes.

One of Henry’s sources, Charles Biderman, CEO of Trim Tabs Investment Research, reckons that pension funds have pumped around $140 billion into U.S. stocks during that time just to restore pre-crash stock/bond ratios to their portfolios. Hedge funds have bought up around $50 billion of shares.

According to Henry, “The money is most likely a big reason why the S&P 500 stock index climbed 33% from its 13-year-low on March 9.” But the S&P has gone nowhere since the start of May. The reason? Most of that new money has been absorbed by all the new follow-on share offerings from existing firms. Bank holding companies in particular..

According to Henry, “Through the end of last week, corporations had sold more than $83 billion of stock since March.” Biderman tells Henry that the total take from newly-issued shares will top $125 billion.

Future gains will be soaked up by an economy that isn’t as full of green shoots as optimists would have you believe. Consumers will continue to default on mortgages and credit cards at record levels, and banks will still have to replace the capital. Expect more offerings.

The Investrend Earnings Calendar features Costco (NASDAQ: COST), expected at $0.53 versus $0.67 a year ago; H.J. Heinz (NYSE: HNZ), expected at $0.54 versus $0.61 a year ago; Perry Ellis Int’l (NASDAQ: PERY), expected at $0.23 versus $0.60 a year ago; Shoe Carnival (NASDAQ: SCVL), expected at $0.25 versus $0.38 a year ago.

The Investrend Economics Calendar lists Durable Goods Orders for April (8:30 a.m.), Weekly Initial Jobless Claims (8:30 a.m.), New Home Sales for April (10 a.m.), Leading Indicators Index for April (10 a.m.), Treasury auctions 7-year notes (1 p.m.).

The Investrend Events Calendar showcases ADVS, MORN at New York Society of Security Analysts Tools of the Trade: New Technologies Conference; AMZN shareholders Meeting; APC, DK, D, DVN at Deutsche Bank Securities Energy & Utilities Conference; COMV, AVAV at Infocast Opportunities in Grid-Connected Mobility Conference; CSCO, IBM, RAX, SVVS at Morgan Stanley Cloud Computing Symposium; CY, PLCM, DIVX, MVL at Cowen and Company Technology Media & Telecom Conference; DD, MCD, EBAY, GLW at Sanford C. Bernstein & Co. Strategic Decisions Conference; HD Shareholders Meeting; KFT, HOQ, WMT, ENDP at AMR Research Supply Chain Executive Conference; MOT, BRCM, VZ, TXN at Barclay’s Capital Wireline and Wireless Conference; TGT Annual Shareholders Meeting.

The Investrend Money Index is an indicator of the depth of market direction or indirection. While not always including the same stocks, the NYSE/NASDAQ 50 Most Actives indicate the direction in which the mass of money is flowing. Last session’s trading showed 16 advancers versus 34 decliners. Advancers were led by Oculus Innovative Sciences, Inc (NASDAQ: OCLS) up 241.67%, Angiotech Pharmaceuticals, Inc. (NASDAQ: ANPI) up 45.52%, SanDisk Corporation (NASDAQ: SNDK) up 14.29%, Financial Bear 3x (NYSE: FAZ) up 8.87%, Ultrashort Real Esta (NYSE: SRS) up 6.68%, Ultrashort Financial (NYSE: SKF) up 6.40%, E*TRADE Financial Corporation (NASDAQ: ETFC) up 6.02%. Decliners followed Gen Motors (NYSE: GM) down 20.14%, Financial Bull 3x (NYSE: FAS) down 8.96%, Ultra Financials Pro (NYSE: UYG) down 6.42%, Wells Fargo & Co New (NYSE: WFC) down 6.12%.

Vote in the Investrend Poll Question of the Day at Investrend Information (http://www.investrendinformation.com).

Investrend Website of the Day: http://www.runpee.com

Quote of the Day: “You only live twice. Once when you are born and once when you look death in the face.” Ian Fleming

Today is: Sierra Club Day.

Happy Birthday: William Pitt the Younger, Louis Agassiz, Jim Thorpe, Ian Fleming, T-Bone Walker, Papa John Creech, Jerry West, Rudy Giuliani, Gladys Knight, John Fogerty, Hunter “Patch” Adams, Sondra Locke, Jerry Douglas, Christa Miller, Kylie Minogue.

Today in History: A solar eclipse occurred in 585 BC, one of the cardinal dates from which other dates can be calculated. The Spanish Armada, with 130 ships and 30,000 men, began to set sail from Lisbon in 1588, heading for the English Channel. President Andrew Jackson signed The Indian Removal Act in 1830, which relocated Indians. In San Francisco, California, John Muir organized the Sierra Club in 1892. Near Callander, Ontario, the Dionne quintuplets were born in 1934 to Olivia and Elzire Dionne, later becoming the first quintuplets to survive infancy. The Golden Gate Bridge opened in 1937.

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