Banking woes hit Wall Street
Big earnings misses at Bank of America, Washington Mutual overpower better-than-expected results from tech bellwethers eBay, Nokia.
NEW YORK (CNNMoney.com) -- U.S. stocks could have some trouble in the early going Thursday on mixed earnings reports, with a major disappointment from Bank of America, the nation's No. 2 bank, overwhelming.strength from tech bellwethers.
Bank of America (Charts, Fortune 500) reported that earnings per share plunged 31 percent, more than twice the drop forecast by analysts surveyed by First Call. Earnings from as its global corporate and investment banking unit plummeted $1.3 billion, or 93 percent.
Futures, which had been slightly higher than fair value before the Bank of America report, turned lower after the report, as the bank's shares lost 4 percent in pre-market trading just after the report.
Still John Silvia, chief economist with Wachovia, said that he believes the markets may weather the bad news from the bank.
Stocks rallied earlier this month when No. 1 bank Citigroupwarned of an even bigger drop in earnings from subprime problems, because it helped answer market uncertainty about how bad problems were in the sector. Silvia said there could be a similar relief rally on this report.
"It's says this is an issue, but not a disaster," said Silvia.
Still the results followed Washington Mutual (Charts) also posting a bigger-than-expected decline in earnings after the bell Wednesday. It also said it is bracing for more difficulties in the housing market. Shares of the nation's largest thrift lost about 4 percent in after-hours trading.
Silvia said that strong tech earnings could help markets weather the bad news from Bank of America.
"The high tech sector seems to be doing well," he said.
Those good tech earnings continued after the close when online auction site eBay (Charts, Fortune 500) reported results that beat Wall Street's estimates, even though a charge related to its Skype unit caused it to post a net loss. Shares jumped in after-hours trading.
Another tech bellwether, Nokia (Charts), the world's largest maker of cell phones, reported a 90 percent jump in earnings early Thursday. That was twice the gain in earnings forecast by analysts surveyed by First Call.
Crude prices held above $87 a barrel in Asian trading. The front-month contract traded at a record $89 a barrel in New York Wednesday after Turkey authorized military action in Iraq.
On the economic front, a report on leading indicators is due at 10 a.m. ET. The Philadelphia Fed Index, a regional manufacturing survey, comes at noon ET.
Chinese state-owned Citic Bank said Thursday it has held no talks with Bear Stearns (Charts, Fortune 500) about buying a stake in the embattled U.S. investment bank, just days after a Chinese regulator said such a bid was under way.
Sony (Charts) is selling its 60 percent of the unit that makes the "Cell" chip used in the PlayStation 3 video console to Toshiba, both companies said Thursday. Terms of the deal were not disclosed but top Japanese business daily The Nikkei reported it was worth an estimated $858 million.
In global trade, major markets in Asia finished the session higher. A rally in Hong Kong pushed the benchmark Hang Seng Index above the key 30,000 mark during the session. European stocks were mostly lower in early trading.