Stock Market Today: Citigroup Earnings (NYSE: C), U.S. Retail Sales Fuel Rally

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Citigroup Inc. (NYSE: C) followed the lead of JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC) when it reported better-than-expected earnings Monday morning, sending the Dow up more than 100 points.

Citigroup earnings, along with a healthy U.S. retail sales report, fueled a morning rally that followed the markets' worst week of 2012. The Dow last week lost 1.6%, the S&P 500 Index sank 2% and the Nasdaq slumped 2.3%.

The Dow shot up about 123 points in the first few minutes of trading, and Citigroup climbed 3%. The Dow cooled its soaring start to about 65 points by 1 p.m. EDT, and Citi was last trading at $34.04, still up about 1.9%.

Citigroup Earnings (NYSE: C)

Citi's earnings rose a modest amount from the same period a year ago, and beat estimates after excluding certain charges related to taut spreads on the bank's own debt.

Net for the first quarter was $1.11 per share, up 7% from a year ago. Revenue came in at $20.2 billion, a full percentage point better than the same period in 2011. Citi's per-share figure came in ahead of forecasts of $1.00, but when including the $1.3 billion charge from the accounting adjustment for tightening credit spreads, the number actually dropped to 95 cents per share.

The bank's core business, Citicorp, recorded revenue of $19 billion, including the adjustment for credit valuation. It booked improvements in consumer banking, securities and transaction services.

Like its peers who have also reported first quarter results, Citi also continues to release loan loss reserves. In the first quarter, the number amounted to a $2.2 billion reduction.

Citi Holdings, the troubled portfolio peppered with toxic mortgage-related assets and other securities, revealed a 26% decline in loans from 2011, to $134 billion. That compares to a 12% increase in loans in the Citicorp business to $514 billion. Overall, Citi Holdings' portfolio shriveled to 11% of total assets, from 15% in the same period a year ago.

Citigroup CEO Vikram Pandit said in a statement, "While our businesses operated in an improved environment, we also saw the benefit of our investments. We generated revenue growth and had positive operating leverage across all three of Citi's core businesses. Global Consumer Banking, our largest business, produced another quarter of good growth in revenue, net income and key drivers like loans and deposits."

Pandit was pleased with the results and performance in the first quarter, and cited improving market environment as the catalyst that helped lift the firm's trading activities.

Pandit also warned that even with the improving operating environment, "there is still much macro uncertainty."

Pandit wasn't the only one to issue words of caution. Several analysts passed off Citi's numbers as solid, or mixed at best, and nothing to get too hyped up about. When taking into consideration that Citi has received the most bailout aid of any bank by far, the quarter was essentially flat.

But revered banking analyst Glenn Shorr of Nomura Securities wrote in a note to clients, "Citi's executing according to plan and the stock is cheap."

U.S. Retail Sales Hit Record High

Also supporting market gains was a boost in U.S. retail sales.

U.S. retail sales rose 0.8% in March, better than expectations of 0.3%, after rising a revised 1% in February.

"Consumers appear to have spent more than anticipated in March even after we control for the effect of higher prices for gasoline and autos," Steven Ricchiuto, chief economist at Mizuho Securities, told CNN Money.

Retail sales hit a record high of $411.1 billion, 24% higher than March 2009's recession low.

A healthier job market and warmer weather got Americans out shopping and opening their wallets. Consumers spent more across most sectors, including building materials, autos, electronics, furniture and clothing.

Joshua Shapiro, an economist at MFR Inc., told The New York Times that retail sales "picked up considerably" in the first quarter after a weak December. Economists warn that while warmer weather may have juiced retail sales in the first quarter, it could lead to weaker retail sales in April and May.

U.S. economic growth in the first quarter still is expected to come in around 2.5% – 3%.

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