Morning Report: More Financial Sector Mayhem

(Stocks in this article: NYSE: C, NYSE: MER, NYSE: PTR, NYSE: F, NYSE: GS, NYSE: KFT, NYSE: CM, NYSE: OPY, NYSE: ETR, NYSE: ECA, NYSE: LLY, NYSE: BSC, NYSE: WB, NYSE: MS, NYSE: BAC, Nasdaq: GOOG, Nasdaq: CSCO, NYSE: SDS)

Futures indicate a lower open, after Asia and Europe moved broadly lower this morning. Financial sector mayhem looks to have no die in it, as Citigroup's (NYSE: C) Board held an emergency meeting that resulted in the resignation of its CEO, Chuck Prince, and speculation of a fourth quarter charge that could surpass Citi's third quarter mess. Don't miss "The Greek's Week Ahead - The Prince is Dead! Long Live the King!"

1. Robert Rubin steps in as Chairman, in an effort to stabilize C shares, while Citi's European Chief Sir Win Bischoff takes the helm as interim CEO. Rumors abound that interested owners like Saudi Arabia's Prince Alaweed Bin Talel al-Saud are aggressively pushing for the return of Sandy Weil. What matters to you today is that there looks to be no rest for weary financial sector investments. Deutsche Bank analyst Mike Mayo recently pointed to potential further write-downs at Merrill Lynch (NYSE: MER), Bear Stearns (NYSE: BSC), Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC) and Wachovia (NYSE: WB). While all these stocks are showing declines over the last three months, one peer is up over 20%, but that name is sticking out like an island in the ocean now. Rumors have started to churn about Goldman Sachs (NYSE: GS) and its recent strong quarterly earnings report. People are looking for holes, and I would advise moving out of GS shares now. GS has recovered since its shares took a summer swoon, and they stand alone in the green this year versus the previously mentioned peers. It looks like a wise time to take profits in Goldman now, or even short the outlier stock, if you subscribe to the "better safe than sorry" creed.


2. President Pervez Musharraf of Pakistan, a nuclear power, imposed martial law and effectively dissolved the Supreme Court of his country just before it was to rule on the legality of his recent reelection. President Bush meets Turkey's Prime Minister Erdogan today, as 100,000 Turkish troops stand poised over Kurdish rebels. Yet, oil is retreating today from last week's highs. I believe smart money has recognized the Fed's new positioning, a weakening U.S. economy, dollar strength, and warm weather pose threat to oil prices at these levels. Meanwhile, dumb money may still have enough speculative fervor to push oil into triple-digits for a few minutes. I think the clear medium-term play is to short oil now, and despite it's Shanghai listing boost, I see PetroChina (NYSE: PTR) as the clear stock to knock. Turkey's populous is calling for military action against the PKK, so Erdogan may have to make some sort of show of force to save face with his people, despite any deal with the U.S. and Iraq. That potential event could be the short-term catalyst to take oil to $100 briefly, before the smart money gains traction.


3. At 10:00 AM, ISM publishes its Non-manufacturing Survey, seen by Bloomberg's consensus touching 54.0. This figure should do better than last week's reported manufacturing number, as Friday's jobs report showed the service sector added 190,000 jobs last month.


4. My favorite long idea remains the UltraShort S&P ProShares (NYSE: SDS), which seek to provide a negatively correlated return to the S&P 500 Index. Also, Cisco Systems (NYSE: CSCO) reports earnings later this week, and I believe it will provide another solid tech sector news bit.
   

Market-Moving News

• The Greek's Week Ahead - The Prince is Dead! Long Live the King!


• CNBC: Prince Out At Citi, Massive Charge Expected


• CNN Money: Asia Lower, As We Forewarned


• Financial Times: FTSE Falls


• Economist: The Geopolitical Week Ahead


• ECONOMIC REPORT 10:00 AM: ISM Non-Manufacturing Survey October (Consensus 54.0)


• Economist: Trouble Brewing in Pakistan


• BBC: Pakistanis Clash With Musharraf's Strong Armed Rule


• AP/Yahoo!: Which Way Did They Go!?! The Oil Trade


• DailyFX: Talking Dollar Sense


• Bloomberg: ECB and BOE On Deck This Week


• Forbes: Hollywood Writers Take to Picket Line


• AP/Yahoo!: Ford (NYSE: F), UAW Reach Tentative Deal


• Platts: Congress to the Rescue? (of your energy bill)


• Economist: Growing Concern About Rising Food Prices


• Yahoo! Earnings Calendar


• Platts: PetroChina (NYSE: PTR) First to a Trillion After Lists in Shanghai


• TheStreet: Goldman (NYSE: GS) Rumors Rev Up


• CNBC: Kraft (NYSE: KFT) Close to Deal to Sell Cereals


• AP/Yahoo!: CIBC (NYSE: CM) to Sell Capital Markets Businesses to Oppenheimer (NYSE: OPY)


• AP/Yahoo!: Entergy (NYSE: ETR) Posts 19% Profit Rise


• AP/Yahoo!: Encana (NYSE: ECA) Buying Texas Assets


• CNN Money: Eli Lilly (NYSE: LLY) Drug Effective, With Risks


• USA Today: Google (Nasdaq: GOOG) Enlists Help With Its Phone


• U.S. News & World Report: Bush Meets Erdogan


• CNN: Appeasing Turkey, Iraq & U.S. Vow to Take Action on PKK


• Economist: Geopolitical Week Ahead (Audio Report)


• Iran Daily: Tales from the Dark Side

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