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Halftime: Can Mike Mayo's Big Citi Meeting Lift Bank Stocks?

Mike Mayo, an analyst with brokerage CLSA Asia-Pacific Markets and long-time critic of Citigroup, finally met with executives Friday after the financial institution shut him out of meetings with top executives for two years, reports CNBC's Mary Thompson.

After meeting with Citigroup's CEO Vikram Pandit and Chief Financial Officer John Gerspach Friday, Mayo told CNBC he's not as negative on the banking giant, but said execution concerns remain. The company's capital expenditures, for example, remain too low and rivals could take advantage of it. Citi argued that capex is lower because the company is more efficient.

Mayo said he's also worried about the new management team, explaining that the financial institution has gone through new executives before without much success. Citi said they're proud of their management.

The analyst continues his claim that their projects are unrealistic. Their target return on assets is too high at 125 basis points. He'd rather see it at 100 basis points.

Mayo said the financial giant gave no reason for why he was shutout of meeting with Citi executives for two years.

Financials Sell Off, Fail to Trade Above 200-Day

After Thompson reported on Mayo's meeting with Citi Monday morning, the financial space started to push lower.

How should you position yourself in the wake of this rare meeting?

From the floor of the New York Stock Exchange, Stuart Frankel's Steve Grasso said there was unexpected strength in financials last week. He said it seems people are selling financial names now to take advantage of pricing.

At the same time, there was an 8 percent spike in volatility, noted Pete Najarian of optionMONSTER.com. Finally above the 22 level, the CBOE Volatility Index is pushing 24. Financials, he noted, began to sell off before the rest of the market Monday morning. The space has hit the 200-day moving average multiple times, but hasn't been able to push above $15 since May and that's been a problem for the space ever since.

JP Morgan Chase Upgraded

Shares of JPMorgan Chase pushed slightly higher Monday after Barron's reported over the weekend that the bank could raise it's dividend yield to 2 percent next year despite stricter regulation.

In the options market, JJ Kinahan of TD Ameritrade said there are some bullish trades being put on JPM. Early Monday, someone bought the November 39 to 40 call spread and sell the 37 puts against it, betting that it would continue to drift higher. If it goes lower, they're willing to buy more at the 37 level, giving them room on the downside.

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MARKET BUZZKILL: GOLDMAN SACHS DOWNGRADES MICROSOFT

Goldman Sachs downgraded Microsoft from 'neutral' to 'buy' Monday, bringing its price target to $28 from $32. The firm said the technology giant has to do a lot of things to earn its valuation, including raise its dividend, improve its consumer strategy and earn its leadership in the cloud computing space.

From the floor of the New York Stock Exchange, Stuart Frankel's Steve Grasso said those covering MSFT are "always disappointed." The stock is "always" at the bottom of the 52-week range, he said, and doesn't think it'll have any catalysts soon.

Pete Najarian of optionMONSTER.com said MSFT is trading at the low of the 52-week range for a reason. Valuations are low, but investors need the company to produce something that will get people excited.

A Windows 7 phone is expected later this month, but Zachary Karabell of RiverTwice Research doesn't think it will help the stock much. He owns MSFT, however, because it's still a dominant force in business applications and in office space.

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Trader disclosure: On Oct. 4, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST); Karabell Owns (AAPL), (GOOG), (RIMM), (C), (GS); Kinahan Owns (MSFT), (YHOO), (C), (WFC), (SPY); Najarian Owns (YHOO); Najarian Owns (WFC) Put Spread; Najarian Owns (F) Bonds; Najarian Owns (F) Call Spread; Najarian Owns (CNI); Najarian Owns (VLO); Najarian Owns (PFE); Najarian Owns (TEVA); Najarian Owns (NOV); Najarian Owns (GDXJ); Najarian Owns (DD); Najarian Owns (DO); Najarian Owns (POT) Call Spread; Najarian Owns (BUCY) Call Spread; Najarian Owns (NTAP) Call Spreads; Najarian Owns (AKAM) Call Spreads; Najarian Owns (NVLS) Call Spreads; Najarian Owns (BCSI) Call Spreads; Najarian Owns (AKAM) CALLS

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (AMGN)
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)

For Zach Karabell:
Funds Managed By Karabell Own (MSFT
Funds Managed By Karabell Own (GS)
Funds Managed By Karabell Are Short (SPY)
Funds Managed By Karabell Are Short (QQQQ)

For Adam Jonas, Morgan Stanley Analyst
Within the last 12 months, Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of Ford Motor Company.
Within the last 12 months, Morgan Stanley has received compensation for investment banking services from Ford Motor Company.
In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from Ford Motor Company.
Within the last 12 months, Morgan Stanley has received compensation for products and services other than investment banking services from Ford Motor Company.
Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking client relationship with, the following company: Ford Motor Company.
Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past has entered into an agreement to provide services or has a client relationship with the following company: Ford Motor Company.
Morgan Stanley & Co. Incorporated makes a market in the securities of Ford Motor Company.
The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.
Morgan Stanley and its affiliates do business that relates to companies/instruments covered in Morgan Stanley Research, including market making, providing liquidity and specialized trading, risk arbitrage and other proprietary trading, fund management, commercial banking, extension of credit, investment services and investment banking. Morgan Stanley sells to and buys from customers the securities/instruments of companies covered in Morgan Stanley Research on a principal basis. Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report.

CNBC.com with wires.

Symbol
Price
 
Change
%Change
C
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JPM MLP ETN
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MSFT
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VIX
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GS
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