Futures Fall as Financials Lose Steam
Following last week's gains, stock index futures indicated a lower open for the stocks Monday as investors remained concerned about the health of the financial system as the stress-test hype wears off.
Several institutions announced plans to sell shares to repay government funds through the Troubled Asset Relief Program, sending their stock prices lower in premarket trading.
Among them are Capital One Financial, which dropped nearly 9 percent; US Bancorp, which was off 3.6 percent, BB&T, which also fell 3.6 percent, and Principal Financial Group.
Europe's largest bank HSBC failed to impress investors, despite reporting first-quarter profit "well-ahead" of last years and saying its investment banking arm was strong. The stock fell nearly 4 percent in morning trading in London.
"We're going to run out of steam," Manus Cranny, market commentator from MF Global, said. "We've had a fantastic 9-week run, nothing lasts forever."
The dollar rose from its recent 7-week lows against the euro as investors became more risk averse once again.
After Friday's better-than-expected U.S. April nonfarm payrolls data, a survey out Sunday suggested the US economy will resume growing in the third quarter of this year.
And according to a weekend report in the Wall Street Journal, the Federal Reserve reduced the size of capital deficits facing several banks before releasing the stress test results.
At least half the 19 banks pushed back against the tests' preliminary findings, the newspaper said. Many executives were reportedly angry with how the Fed calculated the shortfalls, with some calling the estimates too large.
Among the moves, Bank of America's shortfall was reduced from about $50 billion to $34 billion and Citigroup's from $35 billion to $5.5 billion.
Wells Fargo quickly addressed its projected $13.7 billion capital needs by raising roughly $8.6 billion Friday in a new stock offering.
Richmond Federal Reserve President Jeffrey Lacker called on Monday for the U.S. government protection of the financial industry to be rolled back because it had encouraged excessive risk taking at the heart of the current crisis, according to a Reuters report.
"The financial safety net, especially those parts that were more implicit and perceived than explicit and written into the laws, played a significant role in the accumulation of risks that ultimately led to the turmoil we are still experiencing," Lacker said.
Fed Chairman Ben Bernanke speaks on "financial innovation and crises" Monday night at the Atlanta Fed's annual financial markets conference in Jekyll Island, Ga.
In corporate news, Warren Buffet's Berkshire Hathaway posted its first quarterly loss since 2001. Berkshire's Class A shares fell 1.3 percent in after hours on Friday.
General Motors CEO Fritz Henderson will give an update on the automaker's restructuring in a conference call at 9:30 am New York time.
The Detroit News reported that GM will shift more production of U.S.-bound vehicles from Europe, Canada and Australia to cheaper labor countries, such as China, South Korea and Mexico. GM will also reportedly limit its total imports to one-third of its domestic sales.
Separately, the Wall Street Journal reported GM has hired an executive search company to help find replacements for half the board by summer.
There are just a few earnings out this week, including Wal-Mart and several other major retailers. In the coming week, retail sales are perhaps the most anticipated but there are plenty of data points to consider.