Stock Futures Fall As Merrill's Subprime Woe Grows
NEW YORK (MarketWatch) -- U.S. stocks on Wednesday readied for an opening drop, with investors spooked by even larger-than-envisioned losses from Merrill Lynch & Co. and concerns about how Amazon.com Inc. may fare in the upcoming holiday shopping season.
The news from Merrill , the country's largest investment bank and Internet retail giant Amazon.com fueled worries about the extent of the damage of the recent credit-related trouble and its impact on the economy.
"The market had been heading into this earnings season with the knowledge earnings would be brought down by credit concerns and subprime lending, that it might spread to other areas of the economy," said Robert Pavlik, chief investment officer at Oaktree Asset Management.
"Ongoing anxieties over Wall Street's woes and the rising fears that the worst of the credit turmoil is not behind us contributes to rate cut speculation," with Fed funds futures pricing in at 92% the chances of a 25 basis point cut next Wednesday, when Federal Reserve officials meet, said analysts at Action Economics.
Futures for the Dow Industrials declined 32 points, or 0.3%, to 13,675.
Those for the S&P 500 dropped 5.80 points, nearly 0.4%, to 1,519.60, while Nasdaq 100 futures fell 9.25 points, or0.4%, to 2,202.75.
Merrill's third-quarter losses of $2.24 billion, or $2.82 a share, topped expectations of 45-cent a share losses on revenue of $3.25 billion, with write-downs from bad mortgage loans and related securities well above the firm's own forecast just a few weeks ago.
Topping most Wall Street estimates, Amazon.com Inc. reported strong quarterly earnings, but the online retailers shares could be pressured on worries about its expected profit margins for the critical holiday shopping season. .
Dow component Boeing Co. reported a steep hike in third-quarter profits, but trimmed its revenue forecast for next year.
In early commodities trade on the New York Mercantile Exchange, crude-oil futures for December delivery fell 20 cents to $85.07, while the spot month for gold futures declined $2.90 to $670.20. .
By Kate Gibson