Futures Fall as Bailout Details Emerge
US stock index futures were lower ahead of the open on Monday, as Friday's euphoria cooled with investors realizing banks are still facing severe hits to balance sheet valuations and limited future earnings despite a financial bailout plan from the government.
The $700 billion plan, which will give the Treasury powers to buy toxic assets, was still being hammered out by the Bush administration and Congress over the weekend.
"It will have an impact on what is happening in the markets, but eventually it will not stop banks from realizing their losses," Marino Valensise, CIO of Barings, told "Worldwide Exchange," adding that they would have to sell assets at discounted prices.
Meanwhile, more details about the temporary ban on short-selling of 799 financial stocks emerged. Information about short positions will not be made public until two weeks after they are placed, the U.S. Securities and Exchange Commission said on Sunday. Hedge funds are likely to welcome the news.
Also in the financial sector, Wall Street's remaining investment banks Goldman Sachs and Morgan Stanley underwent sweeping changes Sunday as the Federal Reserve approved a request to change their status to bank holding companies. The two banks will now be able to create commercial banks, but will be subject to tighter regulation.
Japanese brokerage house Nomura Holdingsreached a deal to buy the Asian operations ofLehman Brothers, sources told Reuters. UK bank Barclays has already snapped up the core US business held by Lehman.
There are no earnings and no major economic data due before the bell.