Futures drop as Citi rekindles credit fears
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Mon, 05 Nov 2007 13:31:02 GMT |
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By Ellis MnyanduNEW YORK (Reuters) - Stock futures slid on Monday as concerns about banks' mounting credit losses swept global equities lower after Citigroup Inc said it may have to write off $11 billion for loan losses and that Chief Executive Charles Prince had quit.Citigroup said the write-offs may increase if markets worsened. It also lowered its previously reported third-quarter earnings per share. The stock of the largest U.S. bank fell 3.3 percent to $36.50 before the opening bell.Two brokerages cut their price targets on Citigroup, the worst performing component of the Dow Jones industrial average so far this year.Citigroup's projected write off, which will be on top of a $6.5 billion write-down last quarter, has helped put shares of other financial services companies on the defensive.Shares of Goldman Sachs Group Inc fell 1.8 percent to $225.49 before the bell, while Merrill Lynch declined 1.4 percent to $56.50. The S&P electronic traded fund for financials dropped 2.4 percent.Until recently hope had grown that the worst of the credit fallout was over. But Merrill Lynch & Co's ouster of its chief executive last week and $8.4 billion write-down put the credit crisis back in the spotlight."These were perceived as fairly well-run public companies, but the fact that they seem to have had such a low handle on the (credit) situation is unnerving to investors," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey. He was speaking of Citigroup and Merrill Lynch."Investors are shaky. They are just getting hit with body blows."S&P 500 futures were down 14.60 points, below fair value, a formula to evaluate pricing taking into account interest rates, dividends and time to expiration on the contract.Dow Jones industrial average futures slid 114 points, and Nasdaq 100 futures dropped 17.5 points.Citigroup named Robert Rubin, the former U.S. Treasury secretary, as the company's chairman, while Sir Win Bischoff, who runs Citigroup's European operations, was named acting chief executive.CNBC reported on Monday that Citigroup's largest individual shareholder, Saudi billionaire Prince Alwaleed bin Talal, favored bringing back former Citigroup chief Sanford "Sandy" Weill on an interim basis.Before the open, Citigroup cut its third-quarter earnings per share to 44 cents from a previously reported 47 cents due to a correction on the valuation of $43 billion in exposure to collateralized debt obligations linked to asset-backed securities.Also adding to market jitters was the political crisis in nuclear-armed Pakistan where President Pervez Musharraf has imposed emergency rule.
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