Bank worries send stock futures lower

[May 06, 2009]  NEW YORK (AP) -- Wall Street appeared headed for a slightly lower open Wednesday, as investors worry banks may need more capital than previously thought.

The market has been awaiting the results of the government's stress tests of the nation's 19 largest banks, due Thursday. The report is expected to reveal which banks will need to raise capital above already required levels as a buffer against potential future losses.

There has been much speculation about which banks are most in need of more cash, but on Wednesday concerns about the stress tests intensified after The Wall Street Journal reported federal regulators have warned Bank of America Corp. it will need to raise around $35 billion -- more than most expectations. The Journal cited unnamed individuals familiar with the situation.

Analysts have said the stress tests have largely been discounted, but the report could easily upset the market's stunning two-month advance if it shows the banking industry is in worse shape than feared.

Ahead of the market's open, Dow Jones industrial average futures lost 39, or 0.5 percent, to 8,343. Standard & Poor's 500 index futures fell 6.40, or 0.7 percent, to 897.00, while Nasdaq 100 index futures shed 6.00, or 0.4 percent, to 1,421.25.

On Tuesday, stocks held on to most of their gains from Monday, which saw the Standard & Poor's 500 index jump into the black for the year. That rally was stoked by positive news on the housing industry and extended a rally that has brought stocks up from 12-year lows in early March. The Dow closed down 16 points, while the S&P 500 index slipped about 3 points.

Confidence has been increasing on Wall Street amid data showing that the economy's slide is moderating. In recent weeks, investors have even been able to look past mixed earnings reports, fears about a possible swine flu pandemic and a bankruptcy filing from one of the country's largest automakers, Chrysler LLC, and send the market higher. But analysts are quick to warn that many challenges remain. Not only are investors fearful of what the stress tests might reveal, they are keenly focused on Friday's report on job losses and unemployment -- one of the most closely watched economic indicators on the Street.

Bond prices were higher early Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.16 percent from 3.17 percent late Tuesday.

The dollar was mixed against other major currencies, while gold prices were unchanged.

Light, sweet crude rose 20 cents to $54.04 in electronic trading on the New York Mercantile Exchange.

Overseas, Hong Kong's Hang Seng index rose 2.5 percent. In late morning trading, Britain's FTSE 100 was up 0.5 percent, Germany's DAX index was up 0.2 percent, and France's CAC-40 was up 0.7 percent. Markets in Japan were closed for a holiday.

[Associated Press; By SARA LEPRO]

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