Daily Rundown: Citi Sets a Positive Tone

Reassuring words from Citi (C), a rebound in global equity markets, and merger news set a positive tone for Tuesday’s trading session. Forty-five minutes before the opening bell on Wall Street, stock index futures point to a possible triple-digit early gain for the Dow Jones Industrial Average. The NASDAQ is indicated 15 to 20 points higher.

Shares of Citi are up 12.5 percent to $1.20 after CEO Vikram Pandit said the bank has been operating at a profit during the first two months of the year. In a memo to employees, Pandit also said Citi’s share price doesn’t reflect the bank’s earnings power or capital position.

Banks were also higher overseas following a rebound in HSBC (HBC). Shares of Europe’s biggest bank are up 12 percent and, after a volatile move lower Monday, are up 6.6 percent on the week.

UK’s FTSE and France’s CAC 40 Index are both up 1.2 percent. Deutsche Bank (DB) is leading Germany’s DAX 1.4 percent higher. In Asia, Japan’s Nikkei slipped .3 percent and Hong Kong’s Hang Seng rallied 3 percent.

Back in the US, merger activity is picking up. The same day Merck (MRK) announced plans to buy Schering Plough (SGP) in a $41.1 billion deal, Roche and Genentech (DNA) were finalizing merger plans, which is expected to involve Roche buying DNA for $95 per share. Meanwhile, Rohm and Haas (ROH) is 4.9 percent higher after reaching a tentative deal to be bought by Dow Chemical (DOW).

Energy-related names might see early strength after crude oil made a run to its best levels of the year. Crude is up 90 cents to $47.97 a barrel. Gold lost $4.50 to $913.50 an ounce.

The economic calendar is light. A report on wholesale inventories is due out at 10:00 a.m. ET, but not expected to have much market impact.

Bonds are lower as stocks recover. The benchmark ten-year Treasury fell 24/32nd and now yields 2.96 percent.

The buck slipped .84 to 98.06 against the Japanese yen and the euro rallied .0194 to 1.28 against the US currency.

In the options market, trading slowed a bit, as stocks finished a choppy trading session broadly lower Monday. The Dow Jones Industrial Average lost 80 points and the CBOE Volatility Index (.VIX) edged up .48 to 49.81. Approximately 5.4 million puts and 7.3 million calls traded on the options exchanges.

Ebay (EBAY) calls were actively traded. Shares fell 16 cents to $10.27 and total options rose to twice the typical levels. 35,000 and 6,200 puts traded. January 2010 calls at the $15 strike saw the most activity. More than 23,000 traded and almost all of that volume traded ask-side of the bid-ask spread. It appears that buyers were dominating the action and positioning for a possible move higher in Ebay between now and yearend.

Bullish trading was also seen in Lexmark (LXK), Hershey’s (HSY), International Paper (IP), and the SPDR Homebuilders Trust (XHB).

Milwaukee-based auto parts-maker Johnson Controls (JCI) saw bearish trading Monday. 8,700 puts traded, compared to 175 calls. January 2010 puts at the $5 strike were the most actives, with 4,800 traded and 85 percent hitting ask-side of the bid-ask spread. It appears that buyers were also active in the October 7.5s, March 12.5, and Jan-10 7.5 puts as well.

Bearish trading also surfaced in Amerigroup (AGP), Marriott (MAR), and the PHLX Japanese Yen Index (.XDN).

Comments

[bricki:]

Let's wait for the quarterly results before deciding if this is a good looking babe or a pig with lipstick.

Mar 10 10:28 AM

[aarc:]

Banks went down 8 months ahead of the major indeces Dow Jones and SnP500.

Meanwhile the effects of spiralling layoffs and severe consumer crunch are still to be factored into the economy at large. Fortunately banks are less affected by these negative growth than the other sectors of the economy such as retail and manufacturing.

Banks have mostly trimmed their excess workforce and overhead expenses ahead while most other companies are still in the trimming process. They are the first ones to get out of the gate in the profit side of the equation. Meanwhile, their balance sheets will still need considerable time to manage back into health. Time heals all wounds as they say. Maybe not all but most of them.

Mar 10 11:16 AM

[anarchist:]

Wait a minute, did everyone miss this little snippet?

NEW YORK (Reuters) - Eli Broad, a former director and shareholder of AIG who joined other investors last year to hatch a plan to reclaim the insurer from federal ownership, said he has thrown in the towel.

Mar 10 11:22 AM

[Aristophanes:]

When a thoroughly discredited CEO who should have been fired months ago causes a rally on Wall St. with just a few words, you know the fundamentals are wrong.

Tomorrow = profit-taking.

Mar 10 01:07 PM

[Moon Kil Woong:]

What fundamentals? If Pandit doesn't understand Citibank's problem is all about the off balance sheet account, cash flow, and extraordinary items rather than operating profit he needs to start looking for another job fast. My assumption is that he does and is just twisting the truth to deceive anyone gullible. Apparently the whole market is? That makes wall Street what? A casino?

In the valley of the blind the one that says he can see is king?

Mar 10 11:37 PM