Q3 Earning report

The first big story of the week is out, and it is a whooper. Citi's earning will fall nearly 60% analysist are reporting. On top of that Citi said its profit were hurt substantially due to loan loss reserves of about $2 billion.

While all of that sounds very bad, it is not all doom and gloom; while Citi will not see any increased growth, Citigroup's said third-quarter revenue will be about the same as it was this time last year. But it will write down about $1.4 billion of its $57 billion portfolio of leveraged loans, lose about $1.3 billion on the value of securities backed by subprime loans, and lose $600 million in fixed-income credit trading, as the bank had trouble navigating market volatility. At some point this has to be expected, growth slows.

"While the direction of the pre-announcement should not come as a surprise, the magnitude is greater than expected with credit being a factor," Lehman Brothers analysts wrote in a note. "Still, we wonder with (Citigroup) among others, attempting to put a tough quarter behind them, if this move helps flush out the negative factors plaguing financials."

September is traditionally the worst month for stocks, the same is true for the 3rd quarter. This is the time when managers begin to make shifts so that assets are in line with future predictions for the beginning of the new year. So looses are no a bad thing. This is a good time to buy; many large caps will look like value stocks right now. Several analysts have predicted major banks may decide to log hefty losses this quarter to clean up their balance sheets ahead of the new year.

Before Citigroup's warning, analysts had been all over the map in their earnings forecasts, but on average had anticipated a modest profit rise. The bank moved its earnings release date to Oct. 15 from Oct. 19. Last year, Citigroup's third-quarter net income was $5.51 billion, or $1.10 per share.

The week of Oct. 15, Bank of America Corp. and JPMorgan Chase & Co. -- the nation's second- and third-largest banks, respectively -- will also be reporting their third-quarter (loss?) results. For BoA we are expecting losses, remember they had to visit the Discount Window just a few weeks ago.

Profit losses will not be limited to the financial sector alone, it looks like for the first time in more than 10 years, the nations largest chain pharmacy, Walgreens, will report a loss as well.