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Futures Fall; BofA Shares Hit, Sun Soars

US stocks looked set to drop at the open Monday as investors braced for the next batch of corporate earnings.

The negative start to the week comes on that back of a six-week winning streak, which has lead many investors to hope for an end to the worst of the stock-market slump. Strong first-quarter earnings added to last week’s gains, but with the majority of companies yet to report, the risk for bleak corporate news is still there.

Bank of America reported earnings that at least on the surface easily surpassed Wall Street expectations.

The company said it earned $4.2 billion in the first quarter, translating to 44 cents per share, well ahead of analyst expectations of 4 cents.

But BofA also warned that it faced "extremely difficult challenges, primarily from deteriorating credit quality" and shares fell 7.5 percent in premarket trading.

Futures added to losses after the BofA earnings, pointing to a drop of more than 1 percent at the opening, but those losses were quickly pared a bit on a big merger in the tech industry.

The market also was troubled by a report that the government is converting its interest in bailed out financial institutions from preferred into common shares. The move is seen as a political maneuver that will enable the White House to avoid asking Congress for more money, but also constitutes a de facto nationalization of the businesses that will give the government ownership stakes.

In the big news outside of earnings, Oracle is acquiring Sun Microsystems for $9.50 a share, a nearly 30 percent premium over the Friday closing price. The deal is valued at $7.4 billion.

Sun shares immediately soared 27 percent on the news, while Oracle fell 4.25 percent.

PepsiCo kicked off the week’s results with better-than-expected quarterly earnings and confirmation of its full-year guidance.

The company also said it was offering about $6 billion to buy up shares in its two largest bottlers, Pepsi Bottling Group and PepsiAmericas, in a bid to further integrate the units. Shares fell 4 percent premarket.

In other earnings news, pharmaceutical Eli Lilly reported a $1.20 per share profit that easily beat analyst expectations, sending shares up 3.7 percent premarket. International Business Machines reports after the bell and is expected to post a profit of $1.66 per share.

The auto industry remained in the throes of reorganization with General Motors gearing up to let go of its controlling stake inOpel/Vauxhall, according to the Financial Times.

GM would ask for no cash for the stakes, just a pledge to invest directly in a new company formed from its European operations, the report said.

Also, GM said 1,600 workers would be losing their jobs in the next few days as efforts continue to cut costs.

Meanwhile, mining giant Rio Tintocame under pressure from its shareholders over its proposed $19.5 billion merger with China’sChinalco, its rejection of BHP Billiton’s bid and its purchase of Alcan.

In other news, US President Barack Obama is looking to curb deceptive practices in the credit-card industry, which have helped to saddle consumers with huge debts, a senior aide said Sunday.

Federal Reserve Chief Ben Bernanke is due to speak on financial literacy from Chicago at 10 am. And Fed Vice-Chairman Donald Kohn will speak on the economic outlook from Newark, Delaware at the same time.

On the economic front, March’s leading indicators data is out at 10 am New York time.