U.S. stock futures headed lower Tuesday after U.S. banking giant Citigroup posted a huge quarterly loss in response to housing market-related writedowns.

Citigroup posted a net loss of US$9.83 billion in the fourth quarter, hit by US$17.4 billion in subprime-related writedowns. The bank announced plans to sell another US$14.5 billion in preferred stock and said it will cut its dividend 41%.

Meanwhile, Wall Street investment bank Merrill Lynch announced it was getting a US$6.6 billion capital injection, notably from sovereign wealth funds of Kuwait and Korea as well as Japan’s Mizuho Corporate Bank.

In U.S. economic news, retail sales were surprisingly weak in December. The drop suggests that the housing slump and gasoline prices might have caught up with U.S. consumers.

Retail sales declined by 0.4%, the U.S. Commerce Department said today.

Meanwhile, the producer price index for finished goods fell 0.1% in December, the U.S. Labor Department said Tuesday, retracing some of November’s 3.2% rise, which was the largest one-month increase since 1973. Economists had expected a 0.1% increase in December.

The core PPI, which excludes food and energy, was up 0.2% last month, slightly above Wall Street forecasts. It rose 0.4% in November.

There are no major economic releases from Statistics Canada today.

The Canadian dollar opened at US98.62¢, up two-fifths of a cent from Monday’s close.

In other earnings news, State Street said its fourth-quarter net income fell 28% as the company built up a legal reserve in an attempt to move past subprime woes at its troubled asset management unit. The banking company also gave a cautious 2008 outlook.

Crude-oil futures fell 35¢ to US$93.52 a barrel. Gold futures rose US$2.40 to US$905.80 an ounce.

Overseas, Japan’s Nikkei Stock Index closed 0.98% lower. In early action, London’s FTSE 100 was down 1.12%, Frankfurt’s DAX lost 0.66% and Paris’s CAC 40 gave up 0.79%.

The Toronto stock market posted solid gains Monday as resource and energy issues offset a disappointing performance by the financial sector.

The S&P/TSX composite closed up 65.71 points, or 0.48%, at 13,698.28.

The junior S&P/TSX Venture composite index closed up 20.80 points, or 0.74%, at 2,818.56.

In New York, stocks rallied, buoyed by surprisingly strong results announced by IBM.

The Dow Jones industrial average gained 171.85 points, or 1.36%, closing at 12,778.15. The S&P 500 also saw gains, closing up 15.23 points, or 1.09%, to settle at 1,416.25.

The tech-heavy Nasdaq composite index gained 38.36 points, or 1.57%, closing at 2,478.30.