Stocks Flat, Oil Hits High As Earnings Roll In
Stocks are sending a mixed message this morning as oil cranks to a new high and earnings season gets underway. European stocks are mixed to firmer, and Asian markets were higher though Tokyo had a flat session.
As expected, Citigroup'sthird-quarter earnings fell nearly 60%, hurt by writedowns related to subprime and leveraged loan, weakness in fixed income and its consumer business. Net income was reported at $2.38 billion. Citigroup is also surrounded by talk that CEO Chuck Prince is on his way out even after the top level management shakeup at Citi announced last week. CNBC's Jim Cramer Friday reported sources told him Prince will be out this week.
Citigroup, meanwhile, is one of three major banks spearheading a plan to head off a fire sale of problem securities. In a major development, the banks plan to set up a $60 billion to $80 billion fund to jumpstart a particularly troubled corner of the credit market. They plan to buy mortgage securities and other debt from structured investment vehicles or SIVs. The banks, including J.P. Morgan and Bank of America, are establishing the fund at the urging of the Treasury Department. The plan has no government guarantees or funding.
CNBC's Mary Thompson will report on the development of this "superfund," aimed at stopping a pressured sale of up to $400 billion in assets held by SIVs. If these securities were brought to market at bargain prices it would impact banks, leaving them with less money to lend to business and consumers. SIVs are off-balance-sheet funds that make money issuing short-term debt to buy long-term, higher-yielding assets. Demand for the short-term debt evaporated this summer, as investors were unwilling to buy debt that might be backed by bad mortgages.
This corner of the market, the asset-backed commercial paper market, remains cobbled as other parts of the credit markets have revived. News of the plan gave an initial boost to the dollar overnight but the currency is now lower against the euro.
Toy maker Mattel reported lower profit this morning, of $236.8 million, slightly below last year's third-quarter level. The results include charges of $40 million for recalls affecting some 20 million potentially unsafe China-made toys.
If consumers have long memories, Mattel may be in for more trouble this holiday season. CNBC's "Wealth in America Report," released yesterday, shows that Americans are turning away from Chinese goods. More than half of those surveyed say they are less likely to buy Chinese-made products and two-thirds would pay more for American made goods.
China is in the news today as the Chinese Communist Party Congress convenes. The next generation of China's leadership will be identified at this congress, as will the Chinese government's priorities for the next five years.
Wealth in America
The CNBC "Wealth in America Report" also shows that Americans plan to spend a lot more this holiday season. This is contrary to some other surveys we've seen. but I must say that CNBC's survey last year rang true once the holiday sales were tallied. This year the report finds Americans plan to spend an average of $839, up 17% from last year.
But the report also showed a worrisome sign for some of those same Americans. Two-thirds of those surveyed said they did not believe they have saved enough for retirement.
In an exclusive interview with CNBC Europe, European Central Bank President Jean-Claude Trichet slapped down European leaders who are complaining that the euro is too strong. Trichet heads to Washington later in the week for the IMF/World Bank meeting where lots of dollar talk is expected to surface around the edges of the meeting. Some Europeans have been calling for intervention to stem the dollar's fall, but Trichet told CNBC's Slivia Wadhwa it's important to "apply verbal discipline." (French President Nicolas Sarkozy.)
Oil and other commodities are on the rise as the dollar continues to shrink. Oil is hitting new records well above $84 per barrel this morning as tension along the Iraq-Turkey border continues to impact the energy market. U.S. Secretary of State Condoleeza Rice urged restraint yesterday. Turkey this weekend fired shells into a village in northern Iraq. Late last week, the Kurdistan Workers Party has said it would move back into Turkey from northern Iraq.
Gold, meanwhile, moved to a 28 year high over night and platinum set a new record.
Plot against Putin?
Russian President Vladimir Putin visits Iran today as a report surfaces that Russian intelligence uncovered a plot to assassinate him there. Russia's Interfax agency said Putin was warned by his special services of a plot to assassinate him during his visit to Tehran, according to Reuters. The report quoted a single security source. Russia is a mediator in the six nation talks on Iran's nuclear efforts.
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