Futures Fall as Earnings Mostly Disappoint

Stock index futures turned slightly lower ahead of the open Tuesday after key corporate earnings sounded a note of caution for investors.

The losses grew after Dow component and construction bellwether Caterpillar widely beat analyst expectations excluding items, but said 2009 would be a more difficult year than 2008. The profit exlcuding items was 39 cents a share excluding items against estimates of 4 cents. But its after-charge results showed a loss of 19 cents per share.

Shares fell about 4.4 percent in premarket trading.

Coca-Cola shares also fell more than 1 percent after the soft drink giant posted earnings that met expectations but revenue that was a bit of a disappointment.

Banks again were in view, as Bank of New York Mellon said first-quarter profit fell by more than half as fees tumbled, and the bank slashed its dividend 63 percent in an effort to build capital. Shares fell more than 6 percent premarket.

Elsewhere, DuPontposted a sharp decline in first-quarter earnings compared with the year-ago period and missed analysts’ revenue expectations, citing weak demand.

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  • And Schering-Ploughsaid quarterly revenue fell 6 percent to $4.39 billion, but reported higher-than expected first-quarter earnings.

    Futures across the board were narrowly below fair value levels, though they were positive before the earnings reports, several from Dow components, began to flow.

    UnitedHealth Group first-quarter profit came in slightly lower as membership in commercial plans for employers fell. The numbers topped analysts' expectations, however but shares fell nearly 3 percent in premarket trading.

    Pharmaceutical giant Merck reported earnings that narrowly missed estimates, as the company said it earned 74 cents a share, 3 cents below expectations. The company said it was hurt by global sales weakness and costs relating to its acquisition of Schering-Plough. Shares fell nearly 3 percent premarket.

    Financial heavyweight BlackRock also is due to report.

    Stocks were hammered Monday as fears over the state of the financial sector returned to haunt investors. Bank of America’s quarterly report revealed a sharp jump in the bank’s exposure to nonperforming assets.

    The company was poised to add to its losses as shares fell 2.7 percent premarket.

    Investors also waited for findings from the government’s bank “stress test,” which many analysts fear will be negative for the sector.

    “US financials have enjoyed a very strong rally over the last two months … to an extent you are seeing a welcome dose of reality into the sector,” Jonathan Reoch, senior portfolio manager at AMP Capital Investors, told CNBC.

    In other news, the government’s TARP scheme came under fire from a new official report. TARP's special inspector general said that the private-public partnership deal, which is intended to free banks from their “toxic assets,” is skewed in favor of private investors and creates "potential unfairness to the taxpayer."

    Meanwhile, troubled automakers Chrysler and General Motors will have access to a new credit line from the government, according to an independent oversight report on the Treasury Department's corporate rescue fund.

    Chrysler will be able to tap about $500 million from the Obama administration, while General Motors will be able to access up to $5 billion, the rescue fund said.

    Government cash could also finding its way to the International Monetary Fund, after President Barack Obama proposed a $100 billion US loan to the organization.