Citigroup losses, retail sales spook investors

An $18.1 billion write-down on investments tied to subprime mortgages at Citigroup Inc. and a report showing a slowdown in retail sales in December prompted a broad sell-off in the stock market Tuesday, with real estate and financial stocks among the hardest hit.

The Dow Jones Industrial Average fell 277 points, or more than 2 percent. First American Corp., which announced plans to spin off its title insurance and other finance businesses into a separate company (see Inman News story) was one of the few real estate stocks posting a gain for the day. First American rose 7 percent to $31.44, down 43.1 percent from its 52-week high.

In a regulatory filing, Citigroup said its net income for the year was $3.62 billion, on revenue of $81.7 billion. The $18.1 billion in pre-tax write-downs and credit costs were the primary driver in a $9.83 billion loss for the quarter, the company said. Shares of Citigroup fell 7.3 percent, to $26.94, down 51.5 percent from their 52-week high.

Although some had predicted that Citigroup would post even bigger fourth-quarter losses -- CNBC reported the write-offs would total $24 billion, and be accompanied by 24,000 layoffs -- a Commerce Department report showing retail sales fell 0.4 percent from November seemed to give weight to worries that the economy is headed toward a recession.

More bad news is expected this week when Merrill Lynch and JP Morgan Chase report their fourth-quarter results.

The New York Times reported Friday that Merrill Lynch's fourth-quarter write-downs could total $15 billion. JP Morgan Chase, which reported $2.45 billion in write-downs in the third quarter, is thought to have less exposure to subprime-related investments in fixed-income markets.

Investors may find Merrill Lynch's write-downs, to be announced Thursday, easier to swallow with the company's announcement that it has lined up $6.6 billion from investors including Korean Investment Corp., Kuwait Investment Authority and Mizuho Corporate Bank.

Real estate stock trends

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