#PreMarket Primer: Thursday, March 27: Citigroup Falls Short In Stress Tests
Citigroup lost some of its credibility this week after the Federal Reserve did not approve the bank's capital plans during annual stress tests.
The tests are designed to asses a bank's ability to continue lending if there was a severe economic downturn; and Citigroup was one of five banks which failed.
The decision means the company will not be able to pay its investors through buybacks or high dividends, which took share prices down nearly six percent in after hours trading.
In other news around the markets:
- The International Monetary Fund has agreed to provide Ukraine with aid totaling $27 billion over the next two years if the nation is willing to meet certain conditions. Among other things, the IMF requires that Ukraine reform its energy sector, something the government has said will be painful.
- The Wall Street Journal reported that Brookstone is preparing to file for bankruptcy as early as Sunday. The consumer gadgets retailer is apparently planning to be bought by Spencer Spirit Holdings for $120 million.
- The UN Security Council is set to meet on Thursday afternoon to discuss North Korea's defiant ballistic missile launches. South Korea's Defense Ministry Spokesman Kim Min-seok said the launches violated the UN's resolutions and provoked the international community. Thursday's meeting is expected to produce a statement from the council condemning North Korea's actions.
- Iranian President Hassan Rouhani is facing a difficult situation as the nation's fuel prices are set to increase due to budget cuts. Rouhani has been working to reform the Iranian economy and gained popularity for his work to repair the nation's damaged relationship with the West. However the fuel price increase will test that popularity as many will likely resent a rise in the cost of living.
Asian markets were mixed on Thursday; the Japanese NIKKEI was up 1.01 percent and the South Korean KOSPI gained 0.70 percent. However China's Shanghai composite was down 0.83 percent, the Shenzhen composite lost 1.49 percent and the Hang Seng index lost 0.24 percent.
European markets were generally higher with the exception of the UK's FTSE, which was down 0.36 percent. The eurozone's STOXX 600 gained 0.11 percent, the German DAX rose 0.16 percent and the Spanish IBEX was up 0.42 percent.
Energy futures were mixed, Brent futures lost 0.15 percent while WTI futures gained 0.89 percent. Gold and silver lost 1.30 percent and 1.75 percent respectively and industrial metals also suffered, with copper down 0.98 percent and aluminum down 1.34 percent.
The euro lost momentum on Thursday and fell 0.17 percent against the dollar and 0.45 percent against the pound. The dollar was up 0.16 percent against the Japanese yen, but lost 0.25 percent to the pound.
Notable earnings released on Wednesday included:
- Paychex, Inc. (NASDAQ: PAYX) reported third quarter EPS of $0.44 on revenue of $636.50 million, compared to last year’s EPS of $0.40 on revenue of $593.30 million.
- Lindsay Corporation (NYSE: LNN) reported second quarter EPS of $1.04 on revenue of $152.80 million, compared to last year’s EPS of $1.50 on revenue of $175.54 million.
Stocks moving in the Premarket included:
- Citigroup Inc. (NYSE: C)was down 5.10 percent in premarket trade after the Fed rejected its capital plans during its annual stress tests.
- Regions Financial Corp (NYSE: RF) lost 1.82 percent in premarket trade after falling 2.65 percent over the past five days.
- The Coca-Cola Co (NYSE: KO) was up 1.01 percent in premarket trade, adding to its 0.42 percent rise over the past week.
- Carnival Corp (NYSE: CCL) gained 0.74 percent in premarket trade after falling 5.85 percent over the past two days.
Notable earnings releases expected on Thursday include:
- Accenture plc. (NYSE: ACN) is expected to report second quarter EPS of $1.04 on revenue of $7.21 billion, compared to last year’s EPS of $1.00 on revenue of $7.06 billion.
- Gamestop Corporation (NYSE: GME) is expected to report fourth quarter EPS of $1.93 on revenue of $3.79 billion, compared to last year’s EPS of $2.16 on revenue of $3.56 billion.
- lululemon athletica inc. (NASDAQ: LULU) is expected to report fourth quarter EPS of $0.73 on revenue of $517.62 million, compared to last year’s EPS of $0.75 on revenue of $485.49 million.
Thursday's economic calendar will include US GDP, US initial and continuing jobless claims, British retail sales, and French consumer confidence.
For a recap of Wednesday’s market action, click here.
Tune into Benzinga’s pre-market info show with Dennis Dick and Joel Elconin here.
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