Futures Fall on Bank Woes, Earnings Fears
Stocks looked set to sink at the open Tuesday as investors fretted over the state of the banking industry and braced for what could be a dire first-quarter earnings season.
- Dow 30: Extended Hours Quotes
- Pre-Markets/Futures Data
New forecasts expected from the International Monetary Fund are to predict that toxic debts held by banks and insurers will spiral to $4 trillion, The Times newspaper of Britain said without citing sources.
Major indexes were likely to fall more than 1 percent at the opening bell. Dow futures were about 100 points below fair value, the S&P was nearly 10 points off and the Nasdaq was down 16 points by 8 am.
Alcoa will be the first Dow component to report first-quarter results, after the bell, but the aluminium producer is expected to post another big loss. Shares of Alcoa were 1.8 percent lower in pre-market trading.
Asian stocks wobbled and European markets were lower in mid-morning trade.
The report added to concerns over the banks highlighted in the previous session by Michael Mayo, a prominent banking analyst at CLSA's Calyon Securities. Mayo’s earnings expectations for the sector were worse than consensus and he has a “sell” rating on many US banking stocks.
One expert speaking out in defense of the sector was Meredith Whitney, a former analyst at Oppenheimer, who said first-quarter earnings may show some improvement.
Shares of Bank of America and Citigroup were more than 4 percent lower in pre-market trading, and JP Morgan Chase shed more than 2 percent.
Banking stocks may be due a reprieve from short-sellers soon however, as US securities regulators are developing two 'circuit breakers' to stem the practice, sources told Reuters.
Nokia shares also were sharply lower premarket, with the mobile phone maker dropping more than 6 percent after WestLB downgraded the stock to sell from neutral.
BlackBerry maker Research in Motion and iPhone manufacturer Apple also were lower, both by about 1.5 percent.
Energy companies also were likely to be under some pressure as light, sweet crude oil prices dropped about $1 a barrel. BP shares fell 3.3 percent premarket
Automakers also were looking at a pullback after a big rally Monday. Ford shares fell 4 percent premarket a day after a big surge when the company said it was reducing its debt 38 percent.
Sun Microsystems also faced more pressure, losing 3.8 percent a day after the company apparently rejected a takeover offer from International Business Machines . Questions are being raised about the future of Sun CEO Joanathan Schwartz.
In other news, a multi-million dollar Ponzi scheme aimed primarily at Chinese-Americans in the Dallas area has been stopped, according to the Securities and Exchange Commission. The SEC said the alleged fraudster called himself the "Chinese Warren Buffett."
On the economic front, February’s consumer credit data is out at 3 pm New York time.