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This post was written by CNBC producer, Robert Hum
European markets and U.S. futures are lower this morning following weakness out of the financial sector as well as some poor outlooks from various U.S. companies.
Along with many other financials which are down mid to high single digits this morning, Bank of America is trading down 8 percent following its Q1 earnings report. While results beat the street’s forecast, earnings quality remains a concern.
Just like some of the other banks reports’ in the past couple of weeks, Bank of America noted a hefty increase in bad loans. Additionally, its Q1 results were enhanced by one-time gains, including a $1.9 billion gain from the sale of China Construction Bank shares.
The bank’s earnings were also helped by a 79% surge in mortgage and home equity loan production and profits in the investment banking division as a result of strong trading profits.
In a research report, Goldman Sachs warned that credit losses are still rapidly growing at Citigroup, whose one-time charges “muddied the watersin assessing the franchises underlying performance” in their Q1 report last Friday. Additionally, Goldman states that they “cannot rule out the possibility that the stress test will impact the level of required capital.”
Meanwhile, Citigroup has reportedly received three bids for its Japanese brokerage unit, Nikko Cordial, and has now closed the final bidding. Japanese banks Mitsubishi UFJ Financial, Mizuho Financial, and Sumitumo Mitsui Financial all have submitted bids for the division, which could fetch upwards of $6 billion.
More weakness ahead:
Diversified industrial Eaton posted a smaller-than expected loss, but issued a pessimist forecast for both the current quarter and the second half of the year. The company’s Q2 guidance of $0.25 falls significantly below the street’s expectations of $1.06, while for the year, the $2.50-$3.00 forecast falls below estimates of $3.44. The company’s CEO expects an economic recovery won’t likely begin until the first quarter of next year.
Oil driller Halliburton is trading down 1 percent pre-open after warning of weakness for the quarters ahead amid further spending cuts by energy companies. While the oil service’s EPS beat estimates in the last quarter, it experience sharp declines in North American results, as operating income in that region plunged 53% year-over-year.
Likewise, fellow driller Weatherford also noted a steep decline in demand. North American revenues plunged 23%, as the company’s Q1 earnings fell 5 cents shy of estimates.
Elsewhere:
After failing to come to a merger agreement with IBM, Sun Microsystems revealed that it will be acquired by Oracle for $7.4 billion. Sun Microsystems pops 27% pre-open, as the $9.50 per share price offered by Oracle represents a 42% premium to Sun Micro’s closing price on Friday.
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