Trader Talk

After The Citi Offering, The Finger-Pointing Begins

Short dollar trade continues to unwind: stock futures are down nearly 10 points as the dollar is at a three-month high. It began rallying again yesterday after the Federal Reserve indicated it would be slowly removing the extraordinary liquidity programs it instituted in the last year, and continued into the evening as traders have been selling the Euro and the Pound.

Most commodities are down 1 to 2 percent.


1) Lots of finger-pointing over Citi's disappointing pricing of its secondary: a) regulators are at fault because they should not have encouraged a sale in December after two other big bank secondaries, b) bank management was greedy because they wanted to find some way to get away from TARP.

Regardless, there are positives here:

Citigroup Headquarters

a) Citi did get the deal done, the largest public equity offering in U.S. capital markets history, in a very tough environment.

b) while the government continues to own those 7.7 billion shares and Citi is technically still under TARP,

they are no longer in a special assistance status, which will help keep talent.

2) Citi not the only one to price secondary at a discount: insurance giant Conseco Inc. down 5 percent pre-open, priced its secondary (45 million shares) at a 7.6 percent discount.

3) FedEx is down 3 percent after its Q3 earnings guidance ($0.50-$0.70) fell short of the Street's consensus of $0.84. The shipper remains cautious on volumes ahead. CFO Alan Graf notes "there is some uncertainty regarding the sustainability of current demand trends after our peak shipping season."

Although Q2 earnings and sales topped estimates, FedEx still saw revenue declines in its Express and Freight services as prices continued to be pressured by weaker economic conditions. The withdrawal of competitor DHL earlier this year may have helped volumes a bit, as there was a modest increase in FedEx's Express shipment volumes (up 4 percent) and stronger results out of its Ground operations.

Competitor UPS is down 1.5 percent pre-open on the FedEx news.

4) Meredith Whitney lowers earnings estimate for Goldman Sachsand Morgan Stanleyfor Q4, 2010 and 2011.

5) Bank of America is up fractionally in pre-market trading after the bank named Brian Moynihan its new Chief Executive Officer effective January 1. Moynihan, the current head of B of A's retail bank, will succeed Ken Lewis, who had announced his retirement from the company.

Theme park owner Cedar Fair up over 20 percent as Apollo Management is buying them for $635 million or $11.50 a share in cash, a 28 percent premium (total transaction value is $2.4 billion, which includes refinancing of the company debt).

6) General Mills is up 0.5 percent pre-open after its Q2 earnings topped estimates ($1.54 vs. $1.45 consensus) on improved margins as higher prices and lower commodity costs helped. Sales were inline with expectations (up 2 percent), however, as overall volumes remained flat.

Looking ahead, the consumer food maker raises full-year guidance from $4.40-$4.45 to $4.52-$4.57, ahead of the consensus estimate of $4.52.

7) Harley-Davidson is down 4 percent after being added to Goldman Sachs' Conviction Sell List. The broker sees motorcycle sales skidding 35 percent to 40 percent in October and November.



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