Citigroup reminds investors of sub prime mess

Third quarter is not the bottom for the financial sector as Citigroup writes down further losses

Citigroup weighed heavily on market sentiments today, Monday, 05 November, 2007 after reports that the company anticipates recording a write-down of approximately $8 billion to $11 billion for its fourth quarter due to worries in the mortgage market. This gave a feeling among investors that after Merrill Lynch and Citigroup, there are more to come in the coming quarters. Barring utilities and consumer staples, all other eight sectors posted loss today.

After being down by more than 150 points earlier in the day, The Dow Jones industrial Average averted a triple digit loss and closed lower by 51.7 points at 13,543.4. The Nasdaq Composite Index, finished lower by 15.2 points at 2,795.18. S&P 500 finished lower by 7.5 points at 1,502.17.

Nineteen of thirty Dow stocks ended in red headed mainly by Citigroup shares. The stock was down almost 4.9% today. The financial sector finished down 1.4% and was the worst-performing of the ten economic sectors.

The write-down of Citigroup was due to significant declines in the fair value of approximately $55 billion of subprime related exposures. The company had recorded a write-down of approximately $6 billion in the third quarter. The company’s announcement imparted a feeling that the third quarter was not the bottom for the financial sector.

Also, following an emergency Citigroup board meeting this weekend, the company’s CEO Charles Prince retired.

Google to release open-source software for mobile telephones

Among other news, Institute for Supply Management reported non-manufacturing sectors of the U.S. economy in October grew more than economists expected, with the ISM index rising to 55.8% from 54.8% in September. A number above 50 reflects expansion.

Google announced today that it will release open-source software for mobile telephones. Google shares rose 2% to $725.65, a new closing high after peaking to a ew all time intra day high at $730.23.

Other than Patni Computers, all Indian ADRs ended in red today. HDFC Bank and ICICI Bank were the topmost losers dropping 3.5% and 3.9% respectively. In the technology area, Infy and Wipro Tech lost 3.6% and 1.7% respectively. Patni shares closed up by 4.1% today.

Geo political concerns coupled with demand concerns weighed on crude prices today, 5 November, 2007 and the same slipped by almost $2/varrel today.

Crude-oil futures for light sweet crude for December delivery closed at $93.98/barrel (lower by $1.95/barrel or 2%) on the New York Mercantile Exchange. Prices are up 59% on a yearly basis. Oil prices rose 16% in October, 2007, the biggest one-month gain since September 2004.

Volume on the New York Stock Exchange came to 1.5 billion, and declining stocks outran advancing issues about 3 to 1. On the Nasdaq, more than 2.1 billion shares exchanged hands, and decliners topped advancers more than 2 to 1

For tomorrow, no economic data is scheduled. Market will nest wait for Chairman Ben Bernanke to testify later in the week to the Congressional Joint Economic Committee regarding the U.S. economic outlook on 8 November.