GE, Bank of America earnings weigh on futures
NEW YORK — Stock futures moved lower Friday after a bigger-than-expected loss at Bank of America and a weak report from General Electric.
Bank of America Corp. said it lost more than $2 billion after preferred dividends in the third quarter, steeper than what analysts had been expecting. One of the largest recipients of government bailout funds, the bank also set aside more than $11 billion to offset bad loans.
The report, which followed slightly disappointing results from Citigroup Inc. and Goldman Sachs Group Inc. on Thursday, suggested that consumers and businesses are still having a hard time paying off their debts.
“It is, afterall, the largest consumer bank and it may have just offered up a reminder that financial strains in the household sector haven’t gone away,” said David Rosenberg, chief economist and strategist at Gluskin Sheff.
General Electric Co.’s report also showed signs of credit weakness. Its profit dropped 44 percent in the most recent quarter, hurt by much lower earnings at its financial unit, GE Capital, which loans money to a variety of businesses. Results though were slightly better than analysts’ estimates.
Solid earnings reports from Google Inc., IBM Corp. and chip maker Advanced Micro Devices Inc. after the closing bell Thursday buffered the losses in futures.
Earnings reports from banks have been of particular focus for the market this week, as investors look for signs that credit losses are stabilizing, which would be the best indicator yet that the economy is improving.
A surprisingly strong profit from JPMorgan Chase & Co. on Wednesday helped push the Dow Jones industrials over the 10,000 mark for the first time in a year, but the reports from Citi and Goldman Sachs on Thursday weighed on shares for much of the day before the market moved higher in the last few minutes of trading.
Ahead of the market’s open, Dow Jones industrial average futures fell 59, or 0.6 percent, to 9,905. Standard & Poor’s 500 index futures fell 7.80, or 0.7 percent, to 1,082.00, while Nasdaq 100 index futures fell 9.00, or 0.5 percent, to 1,739.50.
Bond prices moved higher as the losses in futures steepened. The yield on the benchmark 10-year Treasury note, which moves opposite to price, fell to 3.44 percent from 3.46 percent late Thursday.
Meanwhile, European indexes reversed early losses and turned lower. Britain’s FTSE 100 fell 0.5 percent, Germany’s DAX index lost 0.9 percent, and France’s CAC-40 dropped 1.0 percent.
Earlier Friday, Japan’s Nikkei stock average rose 0.2 percent, while Hong Kong’s Hang Seng index slipped 0.3 percent.
Bank of America shares fell 67 cents, or 3.7 percent, to $17.43 in premarket trading, while GE shares gave up 38 cents, or 2.3 percent, to $16.41.
Despite early losses Thursday, the Dow tacked on another 47 points by the end of the day, bringing its two-day advance to 191 points. Since bottoming in early March, the Dow is now up 53.7 percent.
While investors continue to show they are willing to put money into the market, seizing on any dips in stocks, that momentum could easily be disrupted by a string of worse-than-expected earnings.
Earnings reports have so far largely beat expectations. However, weak revenue at some companies has been worrisome to investors who want to see businesses increase their profits through sales growth not just cost-cutting. That would be the best evidence yet that the economy is improving.
Among the other reports Friday, Halliburton Co. said its profit tumbled 61 percent from a year ago, but its revenue improved this year, increasing 2 percent from the second quarter.
Meanwhile, toy maker Mattel Inc. said its third-quarter profit declined 3 percent because of weak demand for its toys.
Late Thursday, Google reported a record profit as revenue growth accelerated for the first time since the recession began in December 2007.
Though revenue dropped slightly at IBM, it wasn’t as big of a decline as analysts expected. The company also raised its 2009 forecast for the second time. Advanced Micro Devices also reported stronger-than-expected sales.
The dollar was slightly higher against other major currencies, while gold prices slipped.
Oil prices shed 15 cents to $77.43 in electronic premarket trading on the New York Mercantile Exchange.
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