Premarket Wrap

Tuesday, January 15, 2008

Futures indicate a sharply lower open for the mkt on weakness overseas, earnings from Citigroup (C) and weak Retail Sales data. Despite Wall Street's rebound rally yesterday, global mkts languished in Tuesday's trading amid concerns the slowdown in the U.S. is having a contagion effect. Then, Citigroup reported a net loss of $9.8 bln, or $1.99 per share (consensus $1.03), including an $18.1 bln pre-tax write-down for its subprime exposure and a $4.1 bln increase in credit costs for its U.S. consumer business. In turn, the co said it is cutting its dividend 40% to $0.32 per share and that it is raising $12.5 bln in new capital through the sale of convertible preferred stock with a 7% coupon to a number of different investment entities. Finally, Retail Sales and Sales ex-auto both fell 0.4% in Dec, well below expectations. The prior month was also revised modestly lower, with Retail Sales in Nov now 1.0% (previously 1.2%) and Sales ex-auto now 1.7% (previously 1.8%). The weak data was somewhat offset by better than expected PPI data. Producer prices mo/mo came in at -0.1% vs. the 0.2% consensus, with prices yr/yr increasing 6.3% vs. the 7.1% consensus. However, the lower than expected reading in Dec was entirely due to food and energy prices as core PPI met expectations of 0.2% mo/mo and 2.0% yr/yr. Dow futures are currently -116; Nasdaq futures are currently -19.8; S&P futures are currently -16.6. For technical levels of interest, click here... The Bond mkt is higher in early trade, receiving a boost from both Citigroup and the economic data. While the Fed releases the results of yesterday's TAF auction ($30 bln of 28-days) at 10:00ET this morning, there are no Fed speakers scheduled today. The 10-yr is currently +16/32 to 3.703%... In Europe, mkts fell by mid-day as a large fund-raising by Citigroup only partly mitigated the impact of a quarterly loss, while drugmakers were hit by a downgrade, disappointing sales and product flops. FTSE is currently -1.6%; DAX is currently -0.9%; CAC is currently -1.8%. In Asia, mkts fell as the yen rose to its highest level in seven weeks against the dollar, increasing concern about profit growth. Nikkei closed -1.0%; Hang Seng closed -2.4%; Shanghai Composite closed -1.0%... Notable pre-market Calls include Upgrades: STO at Credit Suisse, BIIB at BWS Financial; Downgrades: TOT at Credit Suisse, FTO, SUN, TSO and VLO at Oppenheimer, BP at Lehman, LSI, NETL, NVDA and XLNX at Deutsche Bank, WFC at Friedman Billings, HAR at Bear Stearns and Soleil... On the Earnings calendar: CAMP, FUL, INTC and LLTC are confirmed to report today after the close... On the Economic calendar, Nov Business Inventories (consensus 0.4%) are scheduled for release at 10:00ET