Global Recession - 92.11% Chance We’re In One

Global Recession - Stocks Fall Slightly

The stock market fell slightly on Monday as the S&P 500 fell 0.34%, the Nasdaq fell 0.94%, and the Russell 2000 fell 1.01%. I consider this a healthy decline because it’s much softer than the violent action in December.

The market was overbought heading into this 2 day decline. Finally, instead of reacting to one extreme move, with the opposite extreme move, the market has settled down. The VIX rose 4.84% which helped push the CNN fear and greed index down from 30 to 28.

Compared to where the market was 4 weeks ago, this is tepid action.

Global Recession - Citigroup Rallies On Earnings Beat

The most important news this week isn’t the government shutdown; it’s the banks’ earnings reports.

Citigroup started the week off on a positive note as its earnings beat led to a 4.06% rally in the stock. As you can see from the slide below, the major financial stocks are relatively cheap.

This means expectations are low. This increases the odds they will rally after earnings. My top long trade of the year, which is to buy the regional bank index, has done well.

The KBW index is up 5.57% year to date which beats the S&P 500’s performance of 3.02%.

Specifically, Citigroup earned $1.61 excluding one time events which beat estimates for $1.55. The firm had 14% earnings growth because of lower expenses, lower corporate taxes, and lower credit costs.

Operating expenses were down 4% to $9.89 billion because of lower compensation costs. On the negative side, revenues missed estimates as they came in at $17.1 billion instead of $17.6 billion. This miss was caused by a 21% decline in fixed income trading revenues as they fell to $1.94 billion.

Global Recession - Even as investors worry about a recession, Citi doesn’t see one...

Its allowance for loan losses fell from 1.86% last year to 1.81%, and company-wide loans were up 3% to $684 billion. We have less economic data because of the government shutdown, so this information is more important than ever.

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