S&P 500 FINANCIALS INDEX
Value 214.31
Change -2.96 (-1.4%)
The MLP index fell 2+ to the 378s while the REIT index was down 2½ to 235. Junk bond funds managed to inch higher & Treasuries finished above their AM lows. Oil declined for the first time in 4 days after Saudi Arabia said the global market has adequate crude supplies. Gold futures rose to a record $1,498 after S&P revised its Treasury credit outlook to negative,
JPMorgan Chase Capital XVI (AMJ)
Treasury yields:
U.S. 3-month 0.06%
U.S. 2-year 0.65%
U.S. 10-year 3.37%
CLK11.NYM....Crude Oil May 11....107.36.....-2.30 (2.1%)
GCJ11.CMX ....Gold Apr 11 ..........1,495.20 .....9.90 (0.7%)
S&P said the US gov risks losing its AAA credit rating unless the gov agrees by 2013 on a plan to reduce budget deficits & the national debt. “If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns,” S&P said in a report that maintained its top rating on US Treasuries while lowering the outlook to “negative” for the first time. S&P said there’s a one-in-three chance that the rating might be cut within 2 years & that its “baseline assumption.” Congress & the administration will come to terms on a plan to reduce record deficits. The benchmark 10-year Treasury note yield closed at 3.37% after rising as high as 3.45% earlier.
U.S. Long-Term Credit Rating Outlook Revised to Negative by S&P on Deficit
Citigroup (C) Q1 income fell 32% on lower revenue from investment banking & a decline in consumer loans. But the bank was able to set aside fewer reserves for losses as more borrowers were able to keep up with debt payments. EPS was 10¢ compared with 15¢ last year & beat the 9¢ forecast. Revenue fell 22% to $19.7B. "The environment has been challenging," CEO Vikram Pandit said. Pandit promised to pay more divs next year once the business stabilizes more (after starting next month when it pays a token penny div following a 10-1 reverse stock split).
Citi income didn't reflect big profits in its core businesses. It got a lift from the release of $3.3B in reserves that had been set aside for losses (common among banks already reporting earnings). The bank set aside an additional $3.2B for future loan losses, down 63% from last year. Revenue from interest collected on consumer loans dropped 16% to $12.2B because it has been writing fewer mortgages & selling off some of its credit card businesses. Total consumer loans were fell 35% to $18.1B & included a 50% decline in total credit card loans & a 17% decline in real estate loans. The intl division performed better, revenues rose 8% to $4.6B. Overseas deposits increased 13% to $163B & loans rose 14% to $126B. The stock was flat & remains in the dumps after recovering from recession lows of $1.
Citigroup First-Quarter Earnings of 10 Cents a Share Top 9-Cent Estimate
Citigroup Inc. (C)
The markets started the week with a rude shock, but hardly unexpected especially after all the publicity about fighting over the current federal budget. Citi continued the trend of banks with uninspiring earnings reports. This week, more of the big industrials will be reporting & they will probably have similar bland reports. The implications of a negative outlook on Treasuries is a dark cloud for the stock markets which will not go away for a long time & will negatively affect valuations in the future. Sorry I missed the AM post, had a computer problem.
Dow Industrials (INDU)
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