Stocks set for lower open as banks slump

NEW YORK (CNNMoney) -- U.S. stocks were expected to take a hit early Thursday, as the world's largest banks fell under more government scrutiny and dragged on equity markets, and the Labor Department reported an expected increase in jobless claims.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were lower ahead of the opening bell. Futures measure current index values against perceived future performance.

Late Wednesday, the Senate issued a 600-page report slamming Goldman Sachs as a "case study" of the recklessness and greed that set off the 2008 financial crisis.

"Our investigation found a financial snake pit rife with greed, conflicts of interest, and wrongdoing," Sen. Carl Levin, a Michigan Democrat said, following the report.

Banks were also down following an announcement from the Federal Reserve that it plans to slap fines on some of the largest U.S. banks for "unsafe and unsound practices" in how they handled foreclosures.

"A combination of the announcement by the Fed yesterday, plus the Senate's comments on Goldman Sachs in particular are weighing on the sector," said Richard Staite, U.S. banks analyst with Atlantic Equities. "Until they're resolved, both issues will continue to weigh over the sector."

In premarket trading, Goldman Sachs (GS, Fortune 500) shares fell 1.2%, Bank of America (BAC, Fortune 500) fell 0.5%, and JPMorgan Chase (JPM, Fortune 500) shares were down 0.4%.

Stocks are coming off of slight gains Wednesday, thanks to a late-afternoon turnaround following President Obama's speech unveiling his plan to cut the U.S. budget deficit by $4 trillion over 12 years.

Obama laid down a series of spending and deficit targets, adding that he wants $3 in spending cuts for every $1 in additional tax revenue.

Economy: The Labor Department reported that first-time jobless claims increased by 27,000, to a weekly total of 412,000. The number came in higher than expected.

Wall Street was expecting initial claims to have totaled 385,000 claims last week.

Meanwhile, the monthly figure for inflation came in lower than expected. The U.S. Bureau of Labor Statistics reported that the Producer Price Index rose 0.7% in March. Producer prices were expected to have risen 1.1% in March.

Companies: Google (GOOG, Fortune 500) reports its quarterly results after the close. Analysts expect the Internet search company's first-quarter profit will jump to $8.10 a share, compared to the $6.76 a share last year.

Google's stock was near its September 2007 levels, falling 9% since Eric Schmidt announced in January that he'd be stepping down as CEO.

BP (BP) was likely to face criticism and questions at its first major shareholder meeting since last year's Deepwater Horizon disaster and Gulf of Mexico oil spill. Shares were flat in premarkets.

World markets: European stocks fell in morning trading. Britain's FTSE dropped 1%, the DAX in Germany fell 0.9% and France's CAC lost 1%.

Asian markets ended mixed. The Shanghai Composite edged lower by 0.3% and the Hang Seng in Hong Kong slipped 0.5%, while Japan's Nikkei ticked up 0.1%.

Currencies and commodities: The dollar rose against the euro, but fell against the Japanese yen and the British pound.

Oil for May delivery fell 24 cents to $105.87 a barrel.

Gold futures for June delivery rose 80 cents at $1,456.40 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 3.44% from 3.47% late Wednesday.