Banking on more Wall St. pain
Major U.S. bank reports unexpected loss, slashes dividend to preserve capital - ahead of busy week for bank results.
NEW YORK (CNNMoney.com) -- An unexpected loss from Wachovia could be the latest drag on U.S. markets Monday.
U.S. stock futures turned sharply lower following the financial results from Wachovia, pointing to another rough start for stocks. Stocks were battered Friday by much weaker than expected earnings and a cut in guidance from corporate bellwether General Electric (GE, Fortune 500). All three major indexes posted more than 2% losses on the day.
Wachovia (WB, Fortune 500), one of the the nation's five largest banks, reported a loss of 20 cents a share, down from earnings of $1.20 a share a year earlier. Analysts surveyed by First Call had forecast earnings of 40 cents a share.
The Charlotte-based bank, which made the ill-timed purchase of mortgage lender Golden West Financial in 2006, also slashed its dividend by 41% to 37.5 cents a quarter, in an effort to preserve capital, and announced plans to raise additional capital through a public offering. Shares of Wachovia plunged more than 10% in pre-market trading following the report.
The results from Wachovia, which came five days earlier than previously expected, kick off a busy week for results from banks and Wall Street firms that is expected to bring another round of bad news, with Citigroup (C, Fortune 500), Merrill Lynch (ML) and Washington Mutual (WM, Fortune 500) all expected to report losses later in the week.
One Wall Street firm reporting bad news late Friday was Bear Stearns (BSC, Fortune 500), which said in a Securities and Exchange Commission filing that its assets under management shrunk 20% since the end of November, and stock and fixed income trading has plummeted to "well less" than half of activity levels in 2007 during the first three months of this year.
The week could also bring word of the long-rumored deal to combine Delta Air Lines (DAL, Fortune 500) and Northwest Airlines (NWA, Fortune 500) into what would be the world's largest airline. Published reports say that deal could be announced by Tuesday.
Video retailer Blockbuster (BBI, Fortune 500) announced Sunday that it had made an unsolicited bid for electronics retailer Circuit City Stores (CC, Fortune 500) that would pay at least $6 a share. That would represent a 54% premium over Friday's closing price of $3.90 for Circuit City.
Markets in Asia closed lower Monday, and major markets in Europe were down in early trading.
Retail sales came in a bit stronger than forecast, as a government report showed 0.2% gain, topping the 0.1% rise forecast by economists surveyed by Briefing.com. But much of that gain came from higher gasoline prices. Stripping out spending at gasoline stations, spending was essentially flat compared to February.
But analysts will also be looking for the strength in sales excluding those at gasoline stations. Record high gasoline prices during the month lifted money spent at gas stations and left consumers fewer dollars to spend on other goods.
At summit of government economic officials from the nation's seven largest economists in Washington over the weekend, U.S. Treasury Secretary Henry Paulson warned "We must expect more bumps in the road" when referring to the current problems in the U.S. economy.
Oil prices rose in early electronic trading, with a barrel of light sweet crude rising 87 cents to $111.01. 
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