Futures Drop as Banks Brace for JPMorgan Fallout
Stock index futures tumbled Friday as investors digested the news of JPMorgan Chase’s $2 billion trading loss as a result of a failed hedging strategy.
JPMorgan said it suffered a trading loss of at least $2 billionfrom a failed hedging strategy. The bank estimates the business unit with the portfolio will post a loss of $800 million in the current quarter, excluding private equity results and litigation expenses. The bank previously forecast the unit would make a profit of about $200 million.
JPMorgan’strading loss dragged on the entire banking sector, pulling shares of Citigroup and Bank of America lower in pre-market trading. At least four brokerages slashed their price target on JPMorgan, while FBR and Stifel cut their rating on the firm to "market perform" from "outperform" and "hold" from "buy," respectively.
European shares trimmed earlier lossesafter Greek conservative leader Antonis Samaras said there were still hopes a coalition government could be formed to avoid a repeat poll after Sunday's election.
On the economic front, producer prices posted a surprising dropof 0.2 percent in April as energy costs declined, according to the Labor Department. Economists had expected prices to be flat.
In addition, the Thomson Reuters/University of Michigan's May preliminary reading of consumer sentiment will be reported at 9:55am ET. Economists expect a reading of 76.2 compared with 76.4 in the final April report, according to a Reuters survey.
Among earnings, Nordstrom reported earnings expectations after pouring tens of millions of dollars into its e-commerce business, and said it would spend more on that during the rest of the year than previously estimated.
Nvidia surged after the chipmaker reported revenue and outlook that topped estimates.
Auction house Sotheby's posted a quarterly loss as expenses grew in the seasonally weak January-March quarter that also compared unfavorably to the year-ago period, when a private sale helped drive revenue.
Almost 450 of the S&P 500 companies have posted earnings so far, with 66.4 percent of firms exceeding estimates, according to Thomson Reuters data, down from more than 80 percent at the start of earnings season.
AT&T has held talks to buy smaller rivalLeap Wireless International in recent months, sources told Reuters, in the latest sign U.S. carriers are looking at acquisitions as a way to grow in a mature market.
Arena surged almost 100 percent after the drugmaker's experimental obesity pill won an FDA panel's support.
Meanwhile Facebook's record initial public offering is already oversubscribed, according to a source familiar with the share listing, days after the social network giant embarked on a nation-wide roadshow. Shares are expected to begin trading on May 18.
Asian markets declined, weighed by JPMorgan's news and following a report that industrial output growth in China slowed in April to the lowest level since May 2009.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
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