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Citigroup Leads Financial Stocks and the Broad Market Higher


Today's financial recap and tomorrow's financial outlook.

Although US equity futures were higher in the pre-market today, the S&P 500 (INDEXSP:.INX) traded in a less than four-point range after the opening bell and through the entire session. Energy, tech, industrial, and financial stocks all led. Treasuries were lower through much of the day. The 10-year yield rose by three basis points to 2.545%. As such, utilities stocks were the weakest performer today. Gold prices were crushed as a large number of analysts reduced their forecasts for precious metals.

Citigroup (NYSE:C) reported second-quarter earnings before the market open. Earnings-per-share of $1.24 beat expectations of $1.05 handily. Revenues of $19.38 billion were also ahead of estimates of $18.81 billion. The stock was up 2.98% today and led the financial sector.

Executives said on the conference call that they see the bank's net-interest margin (NIM) stabilizing at current levels for the rest of the year now that its mortgage and Korea businesses have stabilized. The bank's NIM declined to 2.87% from 2.9% in the prior quarter. It also realized a 40% drop in its equity market revenue due to hedging activities associated with tensions in the Ukraine earlier in the quarter. Lastly, the bank finalized its agreement to pay a $7 billion settlement with the federal government for misleading investors about the quality of mortgage-backed securities sold during the financial crisis.

European bank stocks, especially those with lower ratings, were broadly higher thanks to stronger earnings from Citigroup in the pre-market. The holding company for Banco Espirito Santo (ELI:BES) sold 5% of its 25% stake in the bank in a privately-placed transaction that would allow it to repay a margin loan originally obtained to buy said stake. The bank's stock still lost 7.48% today.

Tomorrow's Financial Outlook

Tomorrow morning the US will release advance retail sales for June. Sales are expected to rise by 0.6% month-over-month after rising 0.3% in May. Same-store sales for June, as reported by Johnson Redbook, recorded their strongest month in five years. Auto sales also showed a similar amount of extraordinary strength, and many believe World Cup-related sales were a positive contributor throughout the month. However, the overall rate of sales growth was likely dragged down by a reduced increase -- or no increase -- in inflation. Janet Yellen will give the Fed's semi-annual Humphrey Hawkins testimony to the Senate Banking Committee starting at 10:00 a.m. EDT.

Overnight, the Bank of Japan will release its monthly monetary policy decision. The bank is expected to upgrade its economic assessment for the first time in six months, according to Nikkei newswire. Also scheduled for release overnight is the Reserve Bank of Australia's (RBA) minutes from its meeting earlier this month. The central bank took on a more dovish tone at the meeting, which was a mild surprise to most market participants. Investors will be examining the minutes to look for the reasoning behind the shift.

Tomorrow will be the first day when a substantial number of earnings reports are released. Notable reports include JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), CSX (NYSE:CSX), Intel (NASDAQ:INTC), Yahoo (NASDAQ:YHOO), and Johnson & Johnson (NYSE:JNJ).

Twitter: @Minyanville

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No positions in stocks mentioned.

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