Futures Dip, Hurt by National City Cash Plan
Stock index futures pointed to a lower start for the week as the first wave in a big week of earnings reports left investors wary.
Also, National City, the No. 10 U.S. bank, said it is close to a capital infusion of up to $7 billion, Reuters reported. While the move would give the bank operating room, the infusion will be dilutive to shareholders, who responded by sending the stock down more than 8 percent in premarket trading.
In earnings, Bank of America the second-largest US bank, badly missed analyst expectations as it said first-quarter profit fell, hurt by write-downs and rising credit losses.
Net income for the Charlotte, N.C.-based company fell to $1.21 billion, or 23 cents per share, from $5.26 billion, or $1.16, a year earlier. That was far below analyst estimates of 41 cents per share and a steep drop from the $1.17 a share profit from the same quarter a year ago.
Shares were trending slightly lower as investors viewed the bank's decision not to lower its dividend as at least some cushion against the otherwise poor performance.
Citigroup posted a large quarterly loss on Friday, but investors were bullish that it was moving past its credit-related problems. Citi shares fell 0.4 percent premarket. Fellow Dow component Merck brought some needed relief to the market as the pharmaceutical beat analyst estimates, helped by the strength of its deal with competitor AstraZeneca. Merck shares gained 1.1 percent premarket.
Futures were off their morning lows following the Merck news and as investors weighed the Bank of America earnings, again positioning to reward a bank for transparencyeven if it meant swallowing yet another round of bad news.
Shares of Novartis climbed 4.6 percent in Switzerland after it reported a 10 percent jump in quarterly profit, topping expectations.
Drug maker Eli Lilly also reported results before the bell, disappointing Wall Street with earnings slightly below projections. Lilly shares fell 2.5 percent premarket.. And Morgan Stanley analysts said Monday that biotech Genentech's Avastin could face big competition from ImClone's Erbitux for treating lung cancer. Genentech shares slipped 1 percent premarket.
No economic indicators are scheduled, but the National Association of Business Economists said economists responding to its quarterly survey are "notably downbeat" about the first quarter and near-term prospects.