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Wait till Citigroup confirms her losses. Market will be volatile.
Merrill Lynch reported losses seem to be a little fishy.
(("The current environment situation will continue for quite a long period of time, a lot longer than perhaps anybody felt a few weeks ago," said Alex Wilmot-Sitwell, global co-head of investment banking at UBS.
"Banks are really struggling to come to terms with unwinding the extent of potential write-offs," said Wilmott-Sitwell, who was speaking at the Reuters Finance Summit in London. "This is going to take a very long time to work through."
Banks in North America and Europe have taken charges running to billions of dollars on holdings on mortgage-backed securities which have been decimated by a meltdown in subprime mortgages - loans extended to borrowers with shaky credit histories.))
Market Overview
| Market Diaries |
 |
| Issues: |
NYSE |
Nasdaq |
|
|
| Advancing |
784 |
975 |
|
|
| Declining |
2,474 |
2,016 |
|
|
| Unchanged |
82 |
113 |
|
|
| Total: |
3,340 |
3,104 |
|
|
| Issues at: |
|
|
| 52-Week High |
31 |
32 |
|
|
| 52-Week Low |
126 |
189 |
|
|
| Volume: |
|
|
| Advancing |
360,210,000 |
796,365,000 |
|
|
| Declining |
1,143,556,000 |
1,308,224,000 |
|
|
| Unchanged |
21,417,000 |
19,417,000 |
|
|
| Total: |
1,525,183,000 |
2,124,006,000 |
|
|
11/5/2007 5:29:00 PM |
|
|
|
|
DOW is down by -111 at 2.30 US time now.
Stocks drop as Citi fuels credit jitters
NEW YORK (Reuters) - Stocks dropped on Monday as Citigroup Inc's (C.N:
Quote,
Profile,
Research) warning of swelling loan losses fanned a sell-off in financial services companies and investors worried about the impact of the credit turmoil on the economy.
Stronger-than-expected growth in the vast services sector last month briefly helped major indexes to cut their losses, but the drag from financial companies' shares kept the market under water.
Shares of Citigroup led declines on both the Dow and the S&P 500, with a drop of more than 4 percent, after the largest U.S. bank said it may have to write off $11 billion for risky credit and that Chief Executive Charles Prince had quit.
Several brokerages cut their price targets on shares of Citigroup, which said the write-offs could grow if markets worsened.
"Financials are 20 percent of the S&P 500 and if that sector doesn't do well ...all bets are off," said Brian Gendreau, investment strategist at ING Investment Management in New York. "People just don't know what's on the balance sheets, and that sector is a big drag and will contine to be a drag for a while."
The Dow Jones industrial average (.DJI:
Quote,
Profile,
Research) was down 80.64 points, or 0.59 percent, at 13,514.46. The Standard & Poor's 500 Index (.SPX:
Quote,
Profile,
Research) was down 10.40 points, or 0.69 percent, at 1,499.25. The Nasdaq Composite Index (.IXIC:
Quote,
Profile,
Research) was down 19.81 points, or 0.70 percent, at 2,790.57.
If the banks' credit losses mount, analysts say the financial institutions' ability to provide money for business investment may be hampered, threatening the outlook for the economy and corporate profits.
Citigroup shares fell to $36.03 on the New York Stock Exchange, while shares of Bank of America Corp (BAC.N:
Quote,
Profile,
Research), the No. 2 U.S. bank, declined 1.8 percent at $44.28.
Shares of Goldman Sachs Group Inc (GS.N:
Quote,
Profile,
Research) declined 3.1 percent to $222.08. The S&P financial index (.GSPF:
Quote,
Profile,
Research) fell 1 percent.
Citigroup Chief Financial Officer Gary Crittenden said "there's no way I think anyone can give you an assurance of how things are going to move." The bank lowered its previously reported figure for third-quarter earnings per share.
Until recently hope had grown that the worst of the credit fallout was over. But Merrill Lynch & Co's (MER.N:
Quote,
Profile,
Research) ouster of its chief executive last week and an $8.4 billion write-down put the credit crisis back in the spotlight. Merrill Lynch fell 1 percent to $56.58.
Also adding to market jitters was the political crisis in nuclear-armed Pakistan where President Pervez Musharraf has imposed emergency rule, analysts said.
Like?
Central banks pumping more liquidity into market?
gut feeling tells me there will be a surprise from dow later
PIMCO: Fed "can't afford" to let housing crack
NEW YORK, Nov 5 (Reuters) - The Federal Reserve "cannot afford" to let U.S. housing prices fall sharply and will have to cut interest rates aggressively to prevent that from happening, said the manager of the world's biggest bond fund on Monday.
"A Fed cannot afford to let homes go down by 10 to 15 percent like we saw in Japan," said Bill Gross, chief investment officer of Pacific Investment Management Co. or Pimco, on CNBC Television. Already, the housing market is facing turmoil in so-called subprime loans made to borrowers with shaky credit. Delinquencies are rising on subprime mortgages and defaults are piling up at record rates as home prices sink, pressuring consumers' desire to spend.
The turmoil in the subprime mortgage-market is a "$1 trillion problem ... there are $1 trillion worth of subprimes and Alt-As and basically garbage loans," Gross said.
He expects $250 billion of subprime and Alt-A mortgage loans to default and those defaults will fall to the balance sheets of investment stalwarts such as Merrill Lynch <MER.N> and Citigroup <C.N>.
The problems in the mortgage market stem from subprime and Alt-A loans with adjustable rates that are suddenly resetting upwards, said Gross.
"We've only begun to see the pain from the standpoint of the homeowner in terms of those monthly payments. Defaults and delinquencies will increase as we extend throughout 2007 and then into 2008."
Gross expects the Fed to move aggressively into the new year. "Ultimately, the Fed has moved down to what we measure as a 1 percent -- or lower -- real interest rate in order to support the economy and revive it again," he said. "A 1 percent real interest rate when tacked on to a 2.0-2.5 percent inflation rate is really a 3.5 percent short-term rate. Ultimately, that's at least where they are headed."
Gross said a 3.5 percent fed-funds target rate implies that the 30-year mortgage rate comes down to 5.0-5.5 percent. "We haven't seen that yet - and that is part of the problem," Gross added.
The problems don't stop there, however.
Municipal-bond investors, he said, must make sure that the underlying foundation of their bonds are solid. "There's not a problem with solvency or default here, but there's a problem in terms of ratings," he said. "These monoline insurers that rate municipal bonds that take a single A or Baa bond to triple-A based on the insurance ... if the insurance companies are written down, then no longer do we have triple-A or double-A munis."
Bank and broker stocks drop on write-down fears
NEW YORK (Reuters) - Bank and brokerage stocks dropped on Monday morning, the day after Citigroup Inc (C.N:
Quote,
Profile,
Research) said it may record an additional $11 billion write-down related to subprime mortgages.
Shares of Citigroup, which also announced the resignation of Chief Executive Charles Prince, fell 4.3 percent. Merrill Lynch & Co Inc (MER.N:
Quote,
Profile,
Research) fell 3.2 percent, Morgan Stanley (MS.N:
Quote,
Profile,
Research) fell 3.6 percent, Goldman Sachs Group Inc (GS.N:
Quote,
Profile,
Research) fell 3.4 percent, and Bank of America Corp (BAC.N:
Quote,
Profile,
Research) fell 1.8 percent.
Citigroup's write-down, on top of some $6.8 billion of write-offs recorded in the third quarter for areas including subprime mortgage securities and leveraged loans, triggered fears that other banks and brokers may also write down assets.
Merrill Lynch, which last week ousted CEO Stan O'Neal, recorded an $8.4 billion write-down in the third quarter, up more than 50 percent from its forecast.
"To see Merrill and Citi increasing the write-downs at such levels, it's really scary. They can't get a handle on it," Ralph Cole, portfolio manager at Ferguson Wellman Capital Management in Portland, Oregon, said on Sunday night.
Banks typically write down assets to the fullest extent possible when they show signs of weakening, and the fact that more write-downs are now emerging worries many investors.
Citi shares fell $1.61 to $36.12, Merrill Lynch fell $1.81 to $55.47, Morgan Stanley fell $2.10 to $56.80, Goldman fell $7.75 to $221.85, and Bank of America fell 81 cents to $44.30.
U.S. ISM Oct service growth exceeds expectations
NEW YORK, Nov 5 (Reuters) - Growth in the U.S. service sector exceeded expectations in October, according to a report released on Monday.
The Institute for Supply Management's services index rose to 55.8 in October from 54.8 in September. Economists polled by Reuters had forecast a median result of 54.0 for October. A number above 50 indicates growth.
The services sector represents about 80 percent of U.S. economic activity, including businesses such as restaurants, hotels, banks and airlines.
Market cuts losses on services data
NEW YORK (Reuters) - Stocks cut losses on Monday but remained in the red as a stronger-than-expected reading of growth in the vast services sector partially offset concerns about banks' credit losses.
The Dow Jones industrial average (.DJI:
Quote,
Profile,
Research) was down 56.82 points, or 0.42 percent, at 13,538.28. The Standard & Poor's 500 Index (.SPX:
Quote,
Profile,
Research) was down 7.13 points, or 0.47 percent, at 1,502.52. The Nasdaq Composite Index (.IXIC:
Quote,
Profile,
Research) was down 15.23 points, or 0.54 percent, at 2,795.15.
DJI is undergoing abc waves so do STI
look like another DOWN for DOW
| Market Indices |
Current |
Change |
% Change |
Date |
| DJ INDU AVERAGE |
13,505.28 |
-89.82  |
-0.66% |
|
05-11-2007 |
| NAS/NMS COMPSITE |
2,784.17 |
-26.21 |
-0.93% |
|
05-11-2007 |
| S&P/TSX COMP IDX |
14,245.54 |
-118.34 |
-0.82% |
|
05-11-2007 |
Fresh credit worries drag shares lower at open
NEW YORK (Reuters) - Stocks fell broadly at the opening bell on Monday on concerns about financial institutions' mounting losses after Citigroup Inc (C.N:
Quote,
Profile,
Research) said it may have to write off as much as $11 billion for risky credit.
In the first minutes of trading, the Dow Jones industrial average (.DJI:
Quote,
Profile,
Research) was down 93.32 points, or 0.69 percent, at 13,501.78. The Standard & Poor's 500 index (.SPX:
Quote,
Profile,
Research) was down 12.27 points, or 0.81 percent, at 1,497.38. The Nasdaq Composite Index (.IXIC:
Quote,
Profile,
Research) was down 33.22 points, or 1.18 percent, at 2,777.16.
Stocks set for fall on Citi's credit woes
NEW YORK (Reuters) - Stocks headed for a sell-off at the open on Monday on concerns about financial institutions' mounting losses after Citigroup Inc (C.N:
Quote,
Profile,
Research) said it may have to write off $11 billion for risky credit and that Chief Executive Charles Prince had quit.
Citigroup said the write-offs could grow if markets worsened. It also lowered its previously reported third-quarter earnings per share. The largest U.S. bank's stock fell 3.3 percent to $36.50 before the opening bell.
In a conference call before the market's open, Citigroup Chief Financial Officer Gary Crittenden said "there's no way I think anyone can give you an assurance of how things are going to move."
Two brokerages cut their price targets on Citigroup, the worst performing component of the Dow Jones industrial average so far this year.
"With subprime, each day another stone seems to fall off the wall," said Ray Rund, managing director and head of research at Shaker Investments in Cleveland, Ohio.
The impact of the credit losses "are probably going to cause a slowdown in the economy. Any time any large financial institution reveals they're having a problem, everyone starts looking over their shoulder to see who else is next."
S&P 500 futures were down 15.70 points, below fair value, a formula to evaluate pricing taking into account interest rates, dividends and time to expiration on the contract.
Dow Jones industrial average futures slid 122 points, and Nasdaq 100 futures dropped 20.5 points.
Citigroup's projected write off, which will be on top of a $6.5 billion write-down last quarter, has helped put shares of other financial services companies on the defensive.
Goldman Sachs Group Inc (GS.N:
Quote,
Profile,
Research) and Merrill Lynch fell before the bell. The S&P electronic traded fund for financials (XLF.A:
Quote,
Profile,
Research) dropped more than 2 percent.
Until recently hope had grown that the worst of the credit fallout was over. But Merrill Lynch & Co's (MER.N:
Quote,
Profile,
Research) ouster of its chief executive last week and an $8.4 billion write-down put the credit crisis back in the spotlight.
Citigroup named Robert Rubin, the former U.S. Treasury secretary, as the company's chairman, while Sir Win Bischoff, who runs Citigroup's European operations, was named acting chief executive.
CNBC reported on Monday that Citigroup's largest individual shareholder, Saudi billionaire Prince Alwaleed bin Talal, favored bringing back former Citigroup chief Sanford "Sandy" Weill on an interim basis.
Before the open, Citigroup cut its third-quarter earnings per share to 44 cents from a previously reported 47 cents due to changes in the valuation of $43 billion in exposure to collateralized debt obligations linked to asset-backed securities.
Also adding to market jitters was the political crisis in nuclear-armed Pakistan where President Pervez Musharraf has imposed emergency rule.
I think they kicked off their day-light saving, if I'm not wrong.
Is it a holiday on the ang mo's calander today no trading?
U.S. Stocks Decline on Speculation of Bigger Loan Writedowns
U.S. stocks fell for the second time in eight weeks as concern that banks will report more loan losses overcame signs the economy is accelerating.
Citigroup Inc. retreated to the lowest level since 2003 after CIBC World Markets said the biggest U.S. bank may cut its dividend to shore up capital. Merrill Lynch & Co. had its biggest weekly decline in six years after Deutsche Bank AG said the world's largest brokerage may report more losses. U.S. indexes closed little changed yesterday as better-than-forecast employment growth was offset by a 1.6 percent drop in bank shares.
``The fact that Citigroup has been potentially undermined and has a liquidity crisis scares a lot of people,'' said Eric Green, senior managing partner at Penn Capital Management in Cherry Hill, New Jersey. ``That's a big issue.''
The S&P 500 lost 1.7 percent this week to 1,509.65. The Dow Jones Industrial Average declined 1.5 percent to 13,595.10. The Nasdaq Composite Index rose 0.2 percent to 2,810.38.
Concern about the extent of losses among financial companies sent banks and brokerages in the S&P 500 to a 6 percent weekly decline. Citigroup's warning on Oct. 15 that defaults will plague lenders for the rest of the year spurred a 7.6 decline in financial shares two weeks ago, the worst since 2002.
Citigroup dropped 11 percent this week to $37.73. The bank may have to sell assets because it needs to raise $30 billion of capital, CIBC said in a research report. Analysts at Credit Suisse AG and Morgan Stanley also lowered their rating on the shares. Citigroup spokesman Michael Hanretta declined to comment about dividend changes.
Merrill Drops
Merrill fell 13 percent to $57.28, its fourth-straight weekly decline. Subprime losses may be bigger than the $8.4 billion Merrill announced last week, said Deutsche Bank analyst Michael Mayo. Merrill spokeswoman Jessica Oppenheim didn't return calls seeking comment.
Merrill is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.
Bond insurers Ambac Financial Group Inc. and MBIA Inc. had the steepest drops in the S&P 500 as analysts said the industry could face a ``downward spiral'' if mortgage defaults increase.
``The mortgage market is just so bad, I'm not sure we're done losing money in the financial sector,'' said Matt King, a portfolio manager at Bell Investment Advisors in Oakland, California. ``I would stay away.''
Economic Growth
Mortgage concerns overshadowed speculation that the U.S. economy will avoid a recession. The Dow average had its biggest rally in a month on Oct. 31 after the Federal Reserve cut its benchmark lending rate by a quarter-point and a report showed the economy grow faster than forecast.
The odds of another interest rate reduction this year fell yesterday after the Labor Department said the economy added 166,000 jobs in October, nearly twice what economists forecast.
Trading in futures contracts implies 68 percent odds that Fed policy makers will reduce their benchmark lending rate by 0.25 point to 4.25 percent on Dec. 11. That's down from 82 percent odds a week ago.
Yields on U.S. Treasury two-year notes fell for the third- straight week, slipping 0.1 point to 3.68 percent, after the Fed cut borrowing costs. The 10-year note's yield lost 0.8 point to 4.32 percent.
Microsoft Corp. rallied 5.8 percent to $37.06, the highest since July 2000, after a Sanford C. Bernstein & Co. analyst said the shares were undervalued relative to growth. Technology shares increased 0.8 percent as a group.
Goodyear Surges
Goodyear Tire & Rubber Co. surged 11 percent to $30.48 for the biggest rally in the S&P 500. The largest U.S. tiremaker reported earnings that exceeded analysts' estimates as sales of more expensive tires increased and the Akron, Ohio-based company cut costs under a new labor contract with the United Steelworkers.
Reports this week on service industries and import prices will give investors further clues on the outlook for economic growth and inflation. Service industries, which make up almost 90 percent of the economy, probably grew at a slower rate in October, while prices climbed for a second month, according to economists surveyed by Bloomberg.
S&P 500 members scheduled to report earnings this week include Walt Disney Co., the world's largest theme-park operator, and General Motors Corp., the world's biggest automaker.
For stocks, Fed chief in the spotlight
Investors banking on more interest-rate cuts may get some clues about what comes next from Federal Reserve Chairman Ben Bernanke, who testifies before the Joint Economic Committee of Congress on Thursday.
"Clearly anything that he says has the potential to move the markets," said Matt Kaufler, portfolio manager at Clover Capital Management Inc., in Rochester, New York.
After the Fed cut interest rates for the second time this year on Wednesday, stocks rallied. But one day later, the gains were erased as the view took hold that further cuts were not in the cards.
With concerns about a credit crunch and losses in subprime mortgages refusing to go away, brokerage downgrades knocked several financial stocks lower.
Investors will be anxiously awaiting the quarterly results of American International Group Inc (AIG.N:
Quote,
Profile,
Research), due after the market close on Wednesday. The insurer's stock has been hitting 52-week lows on rumors that the results will include losses in subprime securities.
For the past week, the Dow Jones industrial average (.DJI:
Quote,
Profile,
Research) fell 1.53 percent and the Standard & Poor's 500 Index (.SPX:
Quote,
Profile,
Research) declined 1.67 percent. But the Nasdaq Composite Index (.IXIC:
Quote,
Profile,
Research) rose 0.22 percent.
Despite the turmoil, stocks are still higher for the year, with the technology-heavy Nasdaq Composite leading the way.
For the year so far, the blue-chip Dow average is up 9.08
percent, while the S&P 500 is up 6.44 percent and the Nasdaq is up 16.36 percent.
TECHS PROP UP THE MARKET
One of the key technology bellwethers, Cisco Systems Inc (CSCO.O:
Quote,
Profile,
Research), the largest U.S. communications equipment maker, will report earnings on Wednesday.
Scott Neuendorf, an analyst at Hester Capital Management in Austin, Texas, said he expects Cisco to report higher earnings of 36 cents per share, in line with the consensus forecast.
He said Cisco and other tech companies have benefited from diversification of revenues, including revenues derived from overseas sources.
"The tech sector has been kind of pulling up the whole market," said John Praveen, chief investment strategist for
Prudential International Investments Advisers LLC in Newark, New Jersey.
Praveen noted that Microsoft Corp (MSFT.O:
Quote,
Profile,
Research) helped lift the market after it reported better-than-expected earnings last month. Intel Corp (INTC.O:
Quote,
Profile,
Research) and Apple Inc (AAPL.O:
Quote,
Profile,
Research) have also reported earnings that beat consensus forecasts.
Other companies due to report earnings this week include Sun Microsystems Inc (JAVA.O:
Quote,
Profile,
Research) on Monday, News Corp (NWSa.N:
Quote,
Profile,
Research) on Wednesday and Walt Disney Co (DIS.N:
Quote,
Profile,
Research) on Thursday.
After Thursday's sharp decline in stocks, the three major U.S. stock indexes rebounded Friday morning following news that October nonfarm payrolls grew by 166,000 -- more than twice as much as the consensus forecast. But the gains evaporated on new concerns about financial companies exposed to subprime losses.
"I think we're going to continue to have volatility as the market reacts to certain data points," said Jim Fehrenbach, head of Nasdaq trading at Piper Jaffray in Minneapolis.
He said the market is searching for a general theme that can be the catalyst for further gains.
CRISIS OF CONFIDENCE
"You have a crisis of confidence right now with Merrill Lynch and Citigroup," Kaufler said. "Both firms have a leadership void to fill."
Merrill Lynch is searching for a new chief executive after the sudden retirement of E. Stanley O'Neal following a huge write-off, and Citi's Charles Prince has been under pressure from shareholders unhappy with a falling stock price.
The week's schedule of economic news is on the thin side, but there are still some significant reports on tap.
On Monday, the Institute for Supply Management reports on the service sector of the economy. The group's index of October activity is expected to fall to 54.0 from 54.8 in September, according to the median forecast of economists polled by Reuters.
On Friday, the Commerce Department reports on international trade for September. The monthly deficit is expected to rise to $58.5 billion from $57.6 billion in August.
The week will see data on productivity and unit labor costs, wholesale inventories, consumer credit, import and export prices, and the first November reading from the Reuters/University of Michigan Survey of Consumers. The consensus forecast is for the consumer sentiment index to decline to 80.0 from 80.9 in the final October survey.
Oops...Citigroup CEO to resign.
If Citigroup is holding an emergency meeting this weekend, it is surely not a golf-over-weekend session.
Financial sector will still be under the microscope of investors.
Expected more bad news to surface.
Hearsay from a broker, the overall subprime mortgage losses can be as high as USD 2 trillion, about 15% of its GDP.
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