Futures Drop as Sun Tumbles, Banks Slip
Stocks were set for a lower open Monday, following a bumper week for the major indexes, as investors looked to the next batch of corporate earnings results.
Dow and S&P futures were below fair value, due primarily to an early pullback in banking stocks that was triggered by analyst comments over continued pressure in the industry. The sector was among the leadership groups that pushed the major averages to their best four-week performance in more than 75 years.
Nasdaq futures also fell as IBM’s $7 billion bid to take over Sun Microsystems fell apart over the weekend, reports citing people close to the matter said. IBM reduced its offer for the Silicon-Valley firm, causing Sun to try and renegotiate the terms of the deal.
Sun shares tumbled 27 percent while IBM lost about 1 percent.
The tech barometer also was hit by a downgrade of Cisco Systems , which fell 2.8 percent after Goldman Sachs downgraded the networking from to neutral from a conviction buy.
Bank stocks also were lower after a stellar week, as analysts wondered whether the myriad rescue measures applied to the industry would be enough.
Analyst Mike Mayo, formerly of Deutsche Bank and now with CLSA Calyon, opened coverage on the group by saying that the recent fixes were "window dressing" meant to cover underlying problems that would continue to bedevil the sector.
Treasury Secretary Timothy Geithner also made statements over the weekend indicating the government would continue to play a strong hand in the industry.
Bank of America fell 4.3 percent while JPMorgan Chase was off 3 percent and American Express fell 4.1 percent in premarket trading.
Shares of CNBC.com-parent General Electric also were under some pressure, falling about 1.5 percent premarket on concerns from some investors that the company faced continued problems with its financing arm.
On the flip side, shares of HSBC gained nearly 3 percent as the bank said investors took on nearly all of the $12.5 billion in discounted shares offered.
Asian stocks rallied to a 6-month high, with the Japanese finance minister saying the government plans to unveil a new economic stimulus package worth more than 2 percent of GDP on Friday, doubling spending to get the country out of the worst recession since World War II. European markets were also higher.
Despite a strong rally in stocks over recent weeks, traders are likely to remain wary at the start of what could be a dire earnings season. Market experts are divided over whether the overall bear-trend will resume or a solid base has already been formed in stock prices.
Bristol-Myers Squibb said it was extending a partnership with Japanese drug companyOtsuka to help lessen the financial blow of generic competition on its blockbuster drug Plavix.
In political news, President Barack Obama has spoken out against North Korea after the small communist state fired a long-range rocket Sunday. North Korea has ignored its international obligations, Obama said in a press statement, joining the widespread global disapproval of the incident.
In other news, employees of UBS won’t be traveling outside of their resident countries for some time, after the wealth management company issued a worldwide travel ban. Last year US authorities detained a senior UBS employee as part of a tax evasion probe.