JPMorgan loss to rattle stocks

@CNNMoneyInvest May 11, 2012: 8:52 AM ET
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NEW YORK (CNNMoney) -- U.S. stocks were set to open lower Friday on worries sparked by a $2 billion trading loss at banking giant JPMorgan Chase.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were all lower. Stock futures indicate the possible direction of the markets when they open at 9:30 a.m. ET.

JPMorgan Chase (JPM, Fortune 500) reported the $2 billion loss after the market closed Thursday. CEO Jamie Dimon cited "errors" and "bad judgment" in trades meant to hedge risk. The bank's shares fell more than 8% in premarket trading Friday.

The loss not only damaged the reputation of JPMorgan Chase, which had come through the financial crisis of 2008 in relatively good shape compared to its Wall Street rivals, but it also raised worries whether conditions since April would cause more unreported losses at other big banks.

Arguments in favor of proposed regulations that limit the trading that banks can do with their own money, known as the Volcker Rule, were also fueled by the big bank's loss. Dimon has been one of the most vocal critics of the Volcker Rule.

Shares of Citigroup (C, Fortune 500), Morgan Stanley (MS, Fortune 500), Bank of America (BAC, Fortune 500), Goldman Sach (GS, Fortune 500) and Wells Fargo (WFC, Fortune 500) were all down more than 2% in premarket trading.

In addition to JPMorgan, investors will continue to focus on the political uncertainty in Europe.

Greek politicians are still struggling to form a coalition government, which makes the future of austerity measures and a European bailout of its debt unclear.

Spain announced a new round of bank reforms Friday, including independent audits of all Spanish banking assets, and requirements for more reserves to protect against real estate loan losses, in an effort to assure investors about the banks' viability. The rules come two days after Spain essentially nationalized one of the largest banks. But the yield on the Spanish 10-year bond edged back above the 6% benchmark that raises alarms with investors.

Meanwhile, further worries about weaker-than-expected economic growth in China could weigh on markets. A reports from China on Friday showed an unexpected drop in the rate of industrial production growth, which could feed fears of a so-called hard landing for the world's No. 2 economy.

U.S. stocks ended mixed Thursday, as investors welcomed a small drop in jobless claims.

World markets: European stocks were lower in midday trading. Britain's FTSE 100 (UKX) fell 0.6%, the DAX (DAX) in Germany slipped 0.5%, and France's CAC 40 (CAC40) shed 0.9%.

Asian markets ended in the red. The Shanghai Composite (SHCOMP) closed down 0.6%, as did Japan's Nikkei (N225), while the Hang Seng (HSI) in Hong Kong lost 1.3%.

Economy: Lower energy prices took wholesale prices down 0.2% in April, according to the Labor Department's producer price index. Economists surveyed by Briefing.com had expected prices to be unchanged from March. But stripping out volatile food and energy prices left core wholesale prices up 0.2%, which matched forecasts.

At 9:55 a.m. ET, the University of Michigan releases its consumer sentiment index. Economists surveyed by Briefing.com predict the index to come in at 75, lower than last month's revised tally of 76.4.

Companies: Shares of upscale retailer Nordstrom (JWN, Fortune 500) fell 4% in premarket trading after it reported earnings of 70 cents a share, which fell 5 cents short of forecasts, despite revenue that was roughly in line with forecasts.

Shares of graphics chip maker Nvidia (NVDA) rose 7.7% in premarket trading after it reported fiscal first quarter revenue that beat forecasts. The company gave a second quarter revenue target of between $990 million and $1.05 billion that also beat current forecasts.

U.S. shares of Sony (SNE) fell 7% in premarket trading, which followed a 6.5% sell-off in Tokyo to a multi-decade low for the stock in its home market. Sony reported lower earnings after the close of the market in Tokyo on Thursday, which hit before the New York exchange open.

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

Oil for June delivery lost 88 cents to $96.20 a barrel.

Gold futures for June delivery tumbled $10.50 to $1,585.00 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury was little changed, leaving the yield near the 1.88% level. To top of page

Index Last Change % Change
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Cisco Systems Inc 24.65 -0.24 -0.96%
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