What happened
Citigroup (C 0.45%) finished the day up 6.8%, closing at $48.44 per share on what was a great day for the stock market.
The Dow Jones Industrial Average ended the day up 1,201 points (3.7%), while the S&P 500 spiked 208 points (5.5%) and the Nasdaq gained 761 points (7.4%). It was the best day for the Nasdaq since April 2020.
So what
The wild market ride on Thursday was driven by a strong inflation report for October as the Consumer Price Index (CPI) came down a bit. It was still up 7.7% compared to last October, but that's lower than the 8.2% rise in September, and it's better than the 8% increase that was expected. The core CPI, which excludes food and energy costs, was at 6.3% -- which was also better than estimates.
The market also got a boost from comments made by two regional Federal Reserve Bank leaders that many interpreted as a possible shift in the Fedʻs interest rate strategy.
NYSE: C
Key Data Points
Patrick Harker, the president and CEO of the Federal Reserve Bank of Philadelphia, said at a speech on Thursday: "In the upcoming months, in light of the cumulative tightening we have achieved, I expect we will slow the pace of our rate hikes as we approach a sufficiently restrictive stance."
In a separate speech, Lorie Logan, the president and CEO of the Federal Reserve Bank of Dallas, said: "I believe it may soon be appropriate to slow the pace of rate increases so we can better assess how financial and economic conditions are evolving."
Now what
Higher interest rates have helped Citigroup generate higher net interest income this year, but inflation, a sputtering economy, and the bear market have severely affected the companyʻs investment banking business. While overall revenue was up 6% in the third quarter, revenue from investment banking was down 64% year over year -- driven by heightened macroeconomic uncertainty and market volatility.
There were reports Thursday that Citigroup was reducing its investment banking staff by several dozen, according to initial reporting by Bloomberg. It was also reportedly reducing trading personnel by 50.
The efforts to streamline expenses amid this difficult stretch was not viewed negatively by the market.
Citigroup is a value stock with a price-to-earnings (P/E) ratio of 6.4 and a price-to-book (P/B) ratio of 0.49, which means it's trading well below book value. It is a solid, cheap buy, as consumer banking boosts revenue until investment banking, trading, and asset management come back.
