Wall St Week Ahead: Stocks eye Citigroup, Geithner's next moves

NEW YORK (Reuters) - Wall Street faces stiff headwinds in the week ahead, the fate of Citigroup largest among them, that stand in the way of building on Friday's big rally and preventing November from winding up as one of the worst months for stocks on record.

The holiday-shortened week begins with President-elect Barack Obama introducing his economic team, including expectations he will formally nominate Timothy Geithner, president of the New York Federal Reserve Bank, as his secretary of the Treasury. It will end with the first key indication on how much consumers will spend this holiday season.

Investors will be looking to Obama and Geithner for signals on what they'll do to stem the economic crisis.

In the past week alone, markets erased more than a decade of gains as banks, led by Citigroup (C.N: Quote, Profile, Research, Stock Buzz), touched new lows and worries mounted about the likelihood of a bailout for automakers. Stocks also reeled from a slew of negative data that put U.S. new jobless claims at a 16-year high.

"The market is still going to remain concerned regarding the state of the financials and the huge meltdown in the banks," said Fred Dickson, market strategist of D.A. Davidson & Co in Lake Oswego, Oregon.

Key economic indicators on tap for next week include existing-home sales for October, consumer sentiment and confidence, and weekly U.S. jobless claims data.

But market-watchers will hone in on Citigroup over the weekend for any developments as to the future of the bank, the second-largest in the United States by assets.

Citigroup's board is meeting Friday to discuss the bank's options, according to a person familiar with the matter. The bank could sell parts of the company, or merge with another institution.

The meeting came amid reports that directors were looking to replace Citigroup's chief executive, Vikram Pandit, and Citigroup was cutting additional staff in Japan.

"Hopefully it'll be a positive news story, whether it be a sale of the company, a restructuring, a new management -- the market will take anything at this point," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

"That would probably continue a rally on Monday morning. If we get nothing out of Citibank, we have a little bit of a problem on Monday morning."

Citigroup's shares shed 20 percent on Friday to close at $3.77, for a loss of around 60 percent for the week. In after-hours trade on Friday Citi shares rose 6.6 percent.

WORST MONTH FOR STOCKS

For the week, the Dow lost 5.3 percent, the S&P 500 fell 8.4 percent, and the Nasdaq lost 8.8 percent, even after all three indexes surged more than 5 percent on Friday.

The dismal week capped off a historic November that is quickly becoming one of the worst months for U.S. stocks since October 1987.

Through Friday, the S&P is down more than 17 percent for the month of November, the Dow is off nearly 14 percent, and Nasdaq is nearly 20 percent lower.

Light volume owing to the Thanksgiving holiday on Thursday and a half day on Friday will almost certainly exacerbate volatility, as retailers take the spotlight in the latter half of the week. Wall Street will look to Black Friday, the day after Thanksgiving, which kicks off the holiday shopping season and is traditionally the biggest shopping day of the year, for a gauge of consumer spending.

But outlooks from major retailers suggest this could be one of the worst holiday shopping seasons in years.

"It's going to give new definition to the word 'black,'" Dickson said. "There's a lot of attention to the retail side of next week."

Investors will also take some cues from the outlooks of homebuilder D.R. Horton Inc (DHI.N: Quote, Profile, Research, Stock Buzz), equipment maker Deere and Co (DE.N: Quote, Profile, Research, Stock Buzz), apparel retailer Talbots Inc (TLB.N: Quote, Profile, Research, Stock Buzz) and luxury jewelry retailer Tiffany and Co (TIF.N: Quote, Profile, Research, Stock Buzz).

Other retailers expected to post results next week include American Eagle Outfitters (AEL.N: Quote, Profile, Research, Stock Buzz), Borders Group (BGP.N: Quote, Profile, Research, Stock Buzz), Dollar Tree (DLTR.O: Quote, Profile, Research, Stock Buzz) and J Crew Group (JCG.N: Quote, Profile, Research, Stock Buzz).

Investors will also be eyeing news on the expected nomination of Geithner for the Treasury post, which on Friday sparked a huge late-day rally in stocks after it was reported by NBC News.

Investors will be watching for a strong signal that Obama and his team are ready to take firm action on the economic crisis, particularly in light of the policy zigzags under the Bush administration, like the recent reversal on the Troubled Asset Relief Program.

Geithner's selection "takes away some uncertainty and gives investors a sense of continuity," Dickson said. "It may settle the market just a little bit."

Still, analysts note that any boost to U.S. stocks will hinge on specific policies submitted by Obama's economic team.

"The markets will want to hear reassurance that he knows how to handle the situation, that he's not anti-investor," said Jay Mueller, economist and portfolio manager at Strong Capital Management Inc.

"We'll improve regulation, but that doesn't necessarily mean harsher regulation or more intrusive regulation."

(Additional reporting by Leah Schnurr, Rodrigo Campos, Doris Frankel and Charles Mikolajczak; Editing by Leslie Adler)

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