Stocks Climb, but Citi Pulls Back

Stocks in New York had been enjoying a break from selling pressure early Friday, but were fluctuating after Citigroup (C Quote - Cramer on C - Stock Picks) CEO Vikram Pandit reportedly denied rumors that his firm was seeking to sell its Smith Barney brokerage unit.

After rising some 170 points early and then taking a brief dip into the red, the Dow Jones Industrial Average, was lately adding 122 points at 7673. The S&P 500 was up 12 points at 764, and the Nasdaq was better by 12 points at 1328.

Beleaguered banking giant Citigroup, whose stock has been crushed this week despite a large investment by Saudi billionaire shareholder Prince Alwaleed, rose early following a report by The Wall Street Journal that it's contemplating selling part or all of itself.

On the other hand, reports by the New York Times and CNBC indicated that senior executives, including Pandit, are not interested in selling segments of the business. Citi shares, which had earlier been helping lift the Dow, were recently down 17%.

During the previous two outings, the major averages got hammered as economic data suggested a downturn would be worse than initially feared. The fate of troubled automakers General Motors (GM Quote - Cramer on GM - Stock Picks), Ford (F Quote - Cramer on F - Stock Picks) and Chrysler remained uncertain after they failed Thursday to secure emergency funding from Congress.

The Big Three were continuing to adjust to headwinds. Media reports indicated that GM was preparing to make more production cuts at several of its factories after already announcing thousands of layoffs this year.

The flagging auto market was also hurting foreign manufacturers. Honda (HMC Quote - Cramer on HMC - Stock Picks) also announced it would cut production in Japan and Europe.

Back in the financial space, government-controlled mortgage buyers Fannie Mae (FNM Quote - Cramer on FNM - Stock Picks) and Freddie Mac (FRE Quote - Cramer on FRE - Stock Picks) said they would cease foreclosures on some homes until January, as they give borrowers a chance to restructure their loans.

Separately, Freddie received a warning from the New York Stock Exchange that it's stock might be delisted, just days after Fannie got a similar notice.

Meanwhile, Bloomberg reported that the Federal Deposit Insurance Corp. may not include loans with maturities of 30 days or less in its $1.4 trillion debt-insurance program. By removing proposed insurance fees from the shortest-term debt markets, the move is expected to help stabilize the overnight lending rate that the Federal Reserve seeks to control.

Earnings statements from several technology companies were also bolstering sentiment. PC maker Dell (DELL Quote - Cramer on DELL - Stock Picks) announced earnings that declined year over year but beat analyst estimates. However, revenue was light. Salesforce.com (CRM Quote - Cramer on CRM - Stock Picks) had even rosier news. The Internet software firm reported a rise in profit on soaring revenue.

Analyst actions gave another big-cap tech name a lift, as Oppenheimer upgraded software giant Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) to outperform from perform with a $22 price target on the stock.

Beyond technology shares, Heinz (HNZ Quote - Cramer on HNZ - Stock Picks) reported rising profits, benefiting from strong sales of its frozen foods as struggling consumers stayed at home to prepare their meals.

Despite optimistic early action, broader economic gloom continued to hang overhead, as Goldman Sachs reduced its growth forecast for the U.S. economy. According to a research note released by the bank and reported by Bloomberg, GDP is falling at an annual rate of 5% in the fourth quarter and will decline in the first and second quarters of 2009. Unemployment will hit 9% by the fourth quarter next year, the note predicted.

President Bush signed into law Friday a bill to extend issuance of unemployment-benefit checks until the end of the year after an unexpected rise in unemployment for the week ended Nov. 15.

Elsewhere, JPMorgan Chase (JPM Quote - Cramer on JPM - Stock Picks) is cutting 10% of its investment-banking jobs, according to a report by the Associated Press.

JPMorgan wasn't alone on the layoff front. Bank of New York Mellon (BK Quote - Cramer on BK - Stock Picks) said it would lay off 1,800 employees starting in January.

Meanwhile, Delta Air Lines (DAL Quote - Cramer on DAL - Stock Picks) said in a regulatory filing that waning demand has prompted it to cut back on future flight capacity.

In other company news, discount retailer Wal-Mart (WMT Quote - Cramer on WMT - Stock Picks) said Mike Duke, vice chairman of its international division, would replace CEO Lee Scott when he retires in February.

Shifting to commodities, crude oil was losing 50 cents to $48.92 a barrel. Gold was climbing $43.70 to $792.40 an ounce.

After roaring higher Thursday, longer-dated U.S. Treasury securities were plummeting in price. The 10-year was losing 1-25/32 to yield 3.22%, and the 30-year was down 5-6/32, yielding 3.74%. The dollar was rising vs. the yen but falling against the euro and pound.

Mary Ann Hurley, vice president of fixed-income trading for D.A. Davidson, said that as stocks made marginal gains, bond prices came down as Thursday's flight-to-quality bid trade was unwinding. "We never should have gone up to that extreme yesterday, so to see profit-taking occur today is not surprising at all," she said.

Overseas, European exchanges, such as the FTSE in London and the DAX in Frankfurt, were trading lower. In Asia, Japan's Nikkei and Hong Kong's Hang Seng finished on the upside.



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Source: thestreet.com