(Updates with Merrill, American Express falling before the
bell, report of JPMorgan in talks with Washington Mutual)
By Ellis Mnyandu
NEW YORK, Jan 11 (Reuters) - U.S. stock futures fell on
Friday as a report that Merrill Lynch & Co <MER.N> will incur
mortgage-related losses of nearly twice what it forecast
sparked more worries about the fallout from the housing slump.
Investors' concern about swelling losses at major financial
companies contributed to sharp declines in Asian and European
stock markets as well.
Merrill is expected to suffer $15 billion in losses
stemming from soured mortgage investments, the New York Times
said, citing people who had been briefed on the bank's plans.
For details, see [ID:nL11761219]
Futures recovered from some losses after Bank of America
Corp <BAC.N>, the No. 2 U.S. bank, said it would acquire
struggling mortgage lender Countrywide Financial Corp <CFC.N>,
a move that could help avert one of the biggest collapses in
the U.S. housing crisis. [ID:nN11273490].
"Financials have got the futures down this morning. You're
talking about more write-offs, and there's also talk that
Merrill is trying to raise more capital," said Peter Dunay,
investment strategist at Leeb Capital Management in New York.
"Until we see positive indications from the financials, the
market is going to continue to struggle with just how big a
problem it's facing from these banks. This has led to big
concerns about consumer spending and the overall economy."
S&P 500 futures <SPc1> fell 7.2 points, below fair value, a
mathematical formula that evaluates pricing by taking into
account interest rates, dividends and time to expiration on the
contract.
Dow Jones industrial average futures <DJc1> were down 59
points. Nasdaq 100 <NDc1> futures were off 7 points.
The report about Merrill came on the heels of a profit
warning from American Express Co <AXP.N>, the second U.S.
credit card company to lower its profit outlook this week. The
mounting gloom about the credit-related losses helped spark a
fall in the dollar but boost safe-haven U.S. Treasuries.
Merrill Lynch shares dropped 2.5 percent to $50.74 before
the bell, while those of American Express, a Dow component, slid 8.9 percent at $44.55. Goldman Sachs cut its rating on
American Express.
Shares of Countrywide fell more than 15 percent to $6.52
before the bell. Bank of America set the takeover terms at a
discount to Thursday's Countrywide close. Shares of Bank of
America fell 3.1 percent to $38.09.
In other bank news, CNBC reported that JPMorgan Chase & Co
<JPM.N> has had very preliminary talks about buying lender
Washington Mutual Inc <WM.N>, whose stock jumped 5.9 percent to
$15 before the bell after the report. [ID:nWEN3346].
(Editing by Kenneth Barry)
(([email protected]; +1 646 223 6085; Reuters
Messaging:[email protected]))
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