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U.S. stock futures fell this morning after Citigroup reported a massive $10 billion loss due an $18.1 billion writedown. As investors digest news from Citi, they look ahead to some key economic data due out this morning, in about an hour's time. Yesterday, following IBM's (NYSE: IBM) robust preliminary report, stocks rallied with the Dow industrials adding 171 points, or 1.36%, the Nasdaq composite rising 38 points, or 1.57% and the S&P 500 gaining 15 points or 1%. The prevalent thought was that along with the expected -- almost promised -- rate cut by the Federal Reserve, other companies' results may also be positively affected by the weak dollar, just as IBM's results were.
Data today includes several key indicators:
- At 8:30 a.m. December retail sales are due. While the Street has already received indication from individual retailers last week, the aggregate data could darken the mood still. According to Briefing.com, economists expect no growth in December sales, and a decline of 0.1% when autos are excluded from the data.
- At the same time, December producer price index, or prices at the wholesale level, will be released. While the Fed has all but committed to another rate cut, high inflation might yet affect the Fed's decision, not to mention make the economy less stable for a recovery. Having said that, economists expect a 0.2% increase for both measure (PPI and core-PPI).
- January Empire State index is also due this morning at 8:30 as are November business inventories.
No following U.S. market rally, global stocks generally declined.
No doubt, though, the main news item at this time is Citigroup (NYSE: C) earnings. U.S.'s largest bank posted its first quarterly loss in 16 years in the fourth quarter. And it wasn't just any loss, it was a $9.83 billion loss, since the bank's mortgage portfolio lost $18.1 billion in value. Citigroup, which luckily also announced $12.5 billion investment from several outside investors included $6.88 billion from the Government of Singapore Investment Corp. also cut its dividend by 41% to 32 cents a share. With all the capital infusions, stock offering and the dividend cut, the bank could still maintain financial strength and indeed the stock is rising 1.5% in premarket trading (7:20 a.m.).
Staying in financials, JP Morgan Chase (NYSE: JPM) is due to report Wednesday and Merrill Lynch (NYSE: MER) Thursday.
Merrill Lynch is also getting some much needed cash as it said Tuesday it reached agreements with three foreign investment funds -- the Korean Investment Corp., Kuwait Investment Authority and Mizuho Corporate Bank --to raise $6.6 billion.
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Reader Comments (Page 1 of 1)
1-15-2008 @ 2:43PM
Scott Cacciatore said...
Scott Cacciatore says O No Citi!!
Ok Citibanks earnings report today was bad, and thats being kind. Citibank reported their first quarterly loss in about 10 years, a loss of almost $10 billion. They slashed their dividend, they also let go 4,200 employees and remember they slashed 17,000 employees in the spring. The nation's largest bank wrote down the value of its portfolio by $18.1 billion and said it was setting aside $4 billion to cover U.S. consumer credit defaults. Many people believe that $4 billion will not nearly come close to covering consumer credit defaults. Citibank also signaled further problems in its consumer businesses as deflated home prices, high energy and food costs, and rising unemployment weigh on people's ability to keep up with their payments. Thats an ugly earnings report. The worst part is it doesnt seem to be looking any better in the near future.
Unfortunately, JPM and all of the other bank stocks are going to take a fall as well. An analyst at a Deutsche Bank downgraded JPM this afternoon saying that JPMorgan's results tomorrow should compare well versus peers, especially for the capital markets half of the company (helped by no structured investment vehicles and only modest exposure to collateralized debt obligations), but ... consensus estimates are too high given tougher capital markets and the traditional banking half of the company. He also cut his price target from 56 to 44. Remember also that Wells Fargo will also release their earnings tomorrow and other banks on Thursday which could lead to more downturns for the bank sector.
The technical analysis for JPM shows strong support at the 40 level and also at the 35-37 level. Citibank though really doesn't show a support level until the 20 level. Yesterday I said that barring very bad fundamental news I would be a buyer of JPM at the 40 level especially because I felt that the lowest JPM would fall would be to 35. I still feel that JPM will not breakdown below 35, but less then expected earnings could force the stock to the 35 level alot quicker then I expected.
Scott Cacciatore signing off until tomorrow.