* Citigroup nearing brokerage venture with Morgan Stanley
* Alcoa due to post earnings late; stock lower pre-market
* For up-to-the-minute market news, click []
(Recasts first paragraph, updates prices)
By Ellis Mnyandu
NEW YORK, Jan 12 (Reuters) - U.S. stocks were set to open
little changed on Monday as investors worried that the start of
the fourth-quarter earnings reporting season may signal further
worsening of the recession.
The caution was tempered, however, by hopes that Congress
will push to have the remaining $350 billion of the $700
billion financial rescue plan released by the time U.S.
President-elect Barack Obama is sworn in on Jan. 20.
Citigroup <C.N> is among stocks to watch after news that
the embattled U.S. bank is nearing a deal to sell a controlling
stake in its Smith Barney retail brokerage business to Morgan
Stanley <MS.N> to raise cash.
A joint venture deal would lead to Morgan Stanley paying
Citigroup about $2.5 billion to $3 billion in cash, a source
familiar with the situation said. Shares of Citigroup, a Dow
component, were down 3.5 percent at $6.75 before the bell.
Morgan Stanley rose 4 percent to $19.80 before the bell.
For more see [].
Alcoa Inc <AA.N> is scheduled to kick off the earnings
season when it posts fourth-quarter results after the bell.
Deutsche Bank recommended a "sell" on the aluminum producer,
sending the stock down 4.3 percent to $10.34 before the bell.
"We are looking for a mixed to lower opening. This week,
it's all about the earnings," said Peter Cardillo, chief market
economist at Avalon Partners in New York.
"The market is already expecting one of the worst earnings
seasons on record ... but the fact that maybe as early as this
week the administration might tap the rescue money might give a
little support."
S&P 500 futures <SPc1> shed 1.50 points, and were below
fair value, a formula that evaluates pricing by taking into
account interest rates, dividends and time to expiration on the
contract. Dow Jones industrial average futures <DJc1> were 15
points lower while Nasdaq 100 <NDc1> futures added 0.50 point.
Falling oil prices were likely to weigh on energy shares,
with U.S. front-month crude <CLc1> down $2.32 at $38.51 a
barrel.
Among bright spots, shares of Advanced Medical Optics
<EYE.N> surged 145 percent to $21.64 in premarket trade after
the company agreed to be bought by Abbott Labs <ABT.N> for
nearly $1.4 billion. [].
According to Thomson Reuters estimates, fourth-quarter S&P
500 earnings should decline 15.1 percent from a year earlier.
As the economic picture worsens, Obama has vowed to
restructure Washington's financial rescue plan to save more
U.S. families from home foreclosures.
Obama's aides have been in discussions with the White House
over whether President George W. Bush should ask Congress for
permission to use the remainder of the $700 billion rescue
package aimed at stabilizing the financial system.
The request would seek to have the funds in place soon
after Obama takes office but it may be hard to get approval as
many lawmakers feel Wall Street firms have already received too
much with few strings attached. They want some of the money to
go instead to struggling homeowners.
Friday's government data showing that the U.S. unemployment
rate surged to its highest in 16 years in December added to
worries about the profit outlook as rising unemployment fuels
caution among consumers, whose spending accounts for about
two-thirds of U.S. economic activity.
The jobs data sent Wall Street tumbling but the benchmark
S&P 500 index <.SPX> remains 18 percent higher since its Nov.
21 bear market intraday low.
(Editing by James Dalgleish)
