UPDATE: JP Morgan Downgrades Citigroup to Neutral

JP Morgan lowers its rating on Citigroup

to Neutral from Overweight and cuts its price target $4 to $42.50 as failure of the Fed stress test delays capital return. JP Morgan says "We are downgrading shares of Citigroup to Neutral from Overweight following the Fed's refusal to approve Citi's capital return plan. Increased capital return in 2012 has been one of the key tenets to our Overweight rating on Citigroup. In addition, we think this denial also hurts management credibility, which had been tarnished following 4Q earnings when expenses were above expectations. Valuation remains attractive, but we see limited upside in the near term until Citi can begin to return capital." C closed at $36.45 a share on Tuesday.