After big gains in the past few days, Citigroup is entering negative territory for the first time in a while. After gaining 6% last week and nearly reaching another 3% earlier this week, the stock has dropped 2.1% within the first hour of trading. Despite some good news for the bank, international news may continue to move shares lower.
A look around
The banking sector as a whole is not in the best shape this morning, following the overall market in a slump:
- The KBW Bank Index is down 0.87%.
- Bank of America is also sliding, with a loss of 1.01%.
- JPMorgan Chase is down 0.76% in trading this morning.
- Wells Fargo is the beacon of light this morning, with only a 0.04% drop.
Japanese markets fell sharply following increased bond yields. The Nikkei 225 fell 7.3% in trading, with help from weak manufacturing data from China. With Citigroup, Bank of America, and JPMorgan all heavily invested in international markets, it makes sense that the falling markets overseas would drive shares down this morning. The three banks are also in the top five that control the U.S. market for swaps, which may also be affected by this morning's nosedive.
Citigroup is the most international bank of the three, and was recently named the top foreign exchange bank in Latin America, as well as the top bank for corporates in Latin America. With its operations focusing on the emerging markets, Latin America has been a great opportunity for Citi. The improvements in LA have recently offset some of the weakness in Japan and other Asian countries for Citi, as seen in their first-quarter earnings when a 6% increase in Latin American consumer banking offset the 1% drop in Asia. If Citi continues to pursue the developments in Latin American countries, it may be able to contain its losses from slowing Asian economies.
Closer to home
Citi was recently reiterated as "Outperform" by Credit Suisse, with analysts increasing the bank's price target to $60 from $53. This continued confidence in the bank may some added salt to the wounds of hedge funds that exited their positions with the bank during the first quarter. Since then, the bank has already gained 15.6% and proved that there's more room to grow.
Though today's drop may be disappointing for the bank and its investors, especially after such a great run over the past eight trading days, it's a reminder that outside forces can cause quite a stir for stocks on any given day. But as depicted by Citi's developments in Latin America, some of the forces can be offset, leaving long-term investors with the knowledge that their stock is on the right track. With a Foolish approach to investing, this gives you the confidence to ride out any ups and downs the market can throw at you.
Citigroup's stock looks tantalizingly cheap. Yet the bank's balance sheet is still in need of more repair, and there's a considerable amount of uncertainty after a shocking management shakeup. Should investors be treading carefully, or jumping on an opportunity to buy? To help figure out whether Citigroup deserves a spot on your watchlist, I invite you to read our premium research report on the bank today. We'll fill you in on both reasons to buy and reasons to sell Citigroup, and what areas Citigroup investors need to watch going forward. Click here now for instant access to our best expert's take on Citigroup.
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