Day Ahead: Citi Under Stress

 | Mar 27, 2014 | 8:45 AM EDT
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The latest round of banking stress tests has claimed one of the big money centers. The Federal Reserve has rejected Citigroup's (C) capital plans, barring the bank from raising its dividend or increasing its share-buyback program. Shares tumbled in premarket trading.

Four foreign banks that do business in the U.S., Royal Bank of Scotland (RBS), HSBC Holdings (HSBC) and Banco Santander (SAN), also failed this round. And Zions Bancorp (ZION) didn't meet capital requirements in a previous round.

Meanwhile, Action Alerts PLUS holdings Bank of America (BAC) and Goldman Sachs (GS) were approved after the banks made adjustments, while JPMorgan Chase (JPM), KeyCorp (KEY) and U.S. Bancorp (USB) passed with "flying colors," according to an Alert from Stephanie Link, co-manager of the charitable trust portfolio.

Equities futures indicate that Wall Street has shrugged off Wednesday's selloff and embraced the first round of economic reports this morning. Initial jobless claims fell by 10,000 to 311,000 last week, far below a predicted increase to 323,000. And the economy expanded in the fourth quarter: The final numbers say gross domestic product rose 2.6% last quarter, compared with a 2.4% gain the previous quarter -- though still short of the 2.7% prediction of economists. Still to come: pending home sales at 10 a.m. ET and the Kansas City Fed's manufacturing index at 11 a.m.

Meanwhile, we saw another round of retail earnings this morning, and leading the charge was Lululemon Athletica (LULU), which beat fourth-quarter profit and sales estimates despite a 2% dip in same-store sales. Signet Jewelers' (SIG) quarterly profit surprised to the upside as same-store sales rose more than 4%.

Also reporting before the bell, consultancy firm Accenture (ACN) fell short of profit estimates by a penny per share but surpassed revenue forecasts. Winnebago Industries (WGO) bested net-income calls by a nickel per share on better-than-expected sales.

Also, late Wednesday, Paychex (PAYX) beat top and bottom line views and raised its full-year profit outlook. And H.B. Fuller (FUL) missed quarterly profit and sales views.

After the close look for results from Oxford Industries (OXM), Re/Max (RMAX), Restoration Hardware (RH) and Red Hat (RHT), the latter of which is an Action Alerts PLUS holding.

Elsewhere, the Treasury Department said it plans to sell its stake in Ally Financial and register the bailed-out auto lender for an initial public offering. And drugmaker Baxter (BAX) announced that it intends to split into two entities.

Finally, the debut of King Digital (KING) wasn't so sweet Wednesday. The maker of the highly addictive Candy Crush Saga videogame posted the biggest first-day decline for an IPO since late last year.

For Fed heads, Cleveland Fed President Sandra Pianalto will speak in Ohio at 8:30 a.m. ET, and Chicago Fed head Charles Evans talks about the economy and monetary policy in Hong Kong at 9:30 p.m. ET.

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