U.S. Stock Futures Hit by J.P. MorganReported by SmartMoney.com on Friday, 11 May 2012 (on May 11, 2012)
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By William Watts U.S. stock index futures pointed to a lower start for Wall Street Friday, sunk by J.P. Morgan Chase & Co. Chief Executive James Dimon's revelation of a $2 billion trading loss attributed to a trader known as the "London Whale."More than two hours before the start of trading, Dow Jones Industrial Average futures were 66 points lower at 12768. S&P 500 futures slipped 8.6 points to 1349, and Nasdaq-100 futures lost 9.25 points to 2609.50. Changes in futures don't always accurately predict early market moves after the opening bell. Bank stocks were expected to be in focus. The trading losses, revealed by Mr. Dimon in a surprise conference call after Thursday's closing bell, stemmed from trades in the bank's chief investment office, where a single trader?dubbed the "London Whale"?reportedly took massive positions in credit-default swaps. Mr. Dimon, who in April had described news reports of the trader's leviathan market exposure as a "tempest in a teapot," on Thursday called the losses "egregious mistakes" and said the losses could deepen this quarter and beyond. "The J.P. Morgan Chase story of balance-sheet strength, operating excellence and earnings diversification remains intact, but the repercussions for the industry and for certain individuals at J.P. Morgan Chase will be severe," wrote strategists at Mediobanca Securities in Milan. J.P. Morgan shares were harpooned in Frankfurt trading, dropping 7.7%. Other U.S. bank stocks were also under pressure in Frankfurt, with Bank of America Corp. losing 3% and Goldman Sachs Group Inc. down 4.5%. Nervousness over Europe's debt problems also remain a factor, analysts said. "While [J.P. Morgan] may be the immediate focus for markets today, the ongoing crisis in the [European] periphery will probably continue to dominate asset performance over the medium term," said Jim Reid, strategist at Deutsche Bank, in a note to clients. Spain's government was expected later Friday to unveil details of its plan to clean up the country's troubled banking sector. The government is expected to require banks to set aside an additional ?35 billion ($45.28 billion) in provisions as a cushion against their real-estate portfolios, according to news reports. This is on top of ?54 billion in provisions previously required to be set aside to deal with toxic assets. Greece also remains on investor radar screens as political parties struggle to put together a coalition government after last Sunday's elections produced a hung parliament. The Stoxx Europe 600 Index fell 0.6%, with analysts citing the fallout from the J.P. Morgan losses and another weaker-than-expected round of data from China. China's industrial output rose 9.3% in April, while retail sales rose 14.1%. Both sets of figures came in below forecasts. South Korean and Hong Kong stocks tumbled Friday, with many Asian markets ending the week with deep losses. The April producer-price index is scheduled for release at 8:30 a.m. ET. Economists forecast a 0.1% fall after a flat reading in March. Core producer prices, which strip out volatile food and energy costs, are forecast to rise 0.2% after a 0.3% March increase. The University of Michigan's consumer sentiment index for May is scheduled for release at 9:55 a.m. ET. On the earnings front, department-store operator Nordstrom Inc. late Thursday reported first-quarter profit of 70 cents a share on revenue of $2.54 billion. The company was expected to post profit of 75 cents a share on sales of $2.52 billion, according to a Thomson Reuters survey of analysts. Express Scripts Holding Co. posted an adjusted first-quarter profit of 79 cents a share on revenue of $12.13 billion, topping Wall Street forecasts. Graphics and mobile chip maker Nvidia Corp. is expected to report first-quarter earnings ahead of the opening bell on Friday. Nymex crude-oil futures fell $1.06 to $96.02 a barrel. Gold futures dropped $17.80 to $1,577.70 an ounce. The ICE dollar index, which measures the U.S. unit against a basket of six major rivals, traded at 80.300, up from 80.159 in North American trade late Thursday. The euro changed hands at $1.2942, up slightly from $1.2936 late Thursday. The dollar traded at �79.90 Japanese yen, down slightly from �79.93. ...
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