PreMarket Report 12-17-09 - CitiGroup Sours Mood (NYSE: C)

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Relative Tickers: (NYSE: C, DRI, FDX, GIS, NKE, ATU, PIR, RAD, WGO, DIA, SPY, DOG, SDS, QLD), (Nasdaq: RIMM, QQQQ)

Stocks were down in the early going this morning, given the failure of Citigroup to unload the weight of the government. Citi raised capital yesterday at below planned price, and raised concern as a result. FedEx noted a less certain quarter ahead, contributing to market uncertainty. The only economic report of the day, Initial Jobless Claims, only offered a neutral note, and markets overseas were mostly lower as well.

Premarket Report

Weekly Initial Jobless Claims

The latest tally of new unemployment benefits filers showed 480K for the week ending December 12, versus last week's revised count of 473K. The weekly count exceeded the economists' consensus forecast for 465K, but we give little weight to these weekly estimates (the market should as well). Despite the slight weekly increase, the four-week moving average still improved 5,250. The advance seasonally adjusted insured unemployment rate stuck at 3.9%.

We view today's labor market data as a net neutral stock market driver. Recent data has illustrated a "less bad" shedding of jobs. Still, recent data have been far from enthusing on an absolute basis. We expect the pace of filings to form a trend representing improvement, as slow gains in consumer spending and production should eventually spur employer needs for new hires. The significant job cuts undertaken by American industry through the decline will likely prove somewhat overdone and require a spike in new hiring at inflection point.

Corporate News Drivers

Citigroup (NYSE: C) shares were down nearly 9% in the premarket, on news the US Treasury would delay a sale of $5 billion of its holdings. This news followed yesterday's share offering by Citi that failed to attract as much demand as was hoped. Citi raised $20 billion through the sale of stock and convertibles, but its sale price proved 20% short of plan.

FedEx (NYSE: FDX) reported results and its shares were down 3.8% in the premarket as a result. FedEx reported 30% lower EPS than its prior year second quarter, and 10% lower revenue. The shipping company beat analysts' consensus on both the revenue and EPS lines, but it warned that its fiscal third quarter might fall lower than analysts' views. The company called for EPS between 50 to 70 cents, short of analysts' view for $0.84.

Thursday's EPS schedule includes some significant names. Look for data from Darden Restaurants (NYSE: DRI), FedEx (NYSE: FDX), General Mills (NYSE: GIS), Nike (NYSE: NKE), Actuant (NYSE: ATU), Pier 1 Imports (NYSE: PIR), Rite Aid Corp. (NYSE: RAD), Winnebago (NYSE: WGO), Research in Motion (Nasdaq: RIMM) and several foreign reporters.

Overseas News Drivers

The European Central Bank (ECB) held a non-policy meeting today. In an administrative matter, Europe's central bank decided to move forward with the construction of a new headquarters that will cost 1 billion euros to construct. The forty-eight story structure planned for Frankfurt is slated to be completed by mid-2014, but if you know Europe...

This non-policy meeting of course resulted in no interest rate action. Yesterday, the ECB closed out its anticrisis extraordinary long-term lending program for banks. It injected 96.94 billion euros into the system, allowing its 16 member banks unlimited funds access. Funding was down significantly from when the program was begun, and this was the intended final funding. Improved conditions in the European money market allow the ECB to kill the program, and offer yet another sign of return to normal conditions. Still, this meeting provided little other reinforcement for a marketplace that might have been attentively seeking further reassurance post the recent credit warnings issued to Spain and Greece.

Markets Overseas

Asia:

1. MSCI Asia APEX 50: -1.23%

2. Japan NIKKEI 225: -0.13%

3. Hong Kong Hang Seng: -1.22%

4. China CSI 300: -2.26%

5. India BSE SENSEX 30: -0.11%

Europe:


1. DJ Euro STOXX 50: -0.91%

2. UK FTSE 100: -1.11%

3. France CAC 40: -0.78%

4. Germany DAX: -0.70%

5. Greece ASE General: -2.31%

(Prices as of hour of publishing, which may not be the close)

Leading Economic Indicators

Leading Economic Indicators will be reported for the month of November at 10:00 AM ET. Economists are looking for a gain of 0.7%, as compared against the 0.3% improvement in October. Positive GDP in Q3 should see follow up in Q4, so LEI gains here are not surprising. Look for our 2010 economic forecast though, as we do not see clear sailing for the coming year. Still, as we have outlined here in the past, recent LEI data have been greatly crutched by government stimulus. We have not achieved independent economic stability as yet.

Philadelphia Fed Survey

The Philly Fed Survey is due at 10:00, and offers another look at the Northeast regional manufacturing situation. The Empire State Report published earlier this week showed a severe 21 point drop to 2.6, and so we will look for consistencies with the Philly data. The Philly Fed Index is seen slipping only modestly to 16.5, from 16.7 in November. Also, the Federal Reserve will report on its balance sheet in the late afternoon.

Natural Gas Report

This weekly take on natural gas stores showed a net draw of 64 Bcf in the week ending December 4. Stocks were still 513 Bcf above the five-year average for this time of year.


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