Wall Street was set for a lower open on Wednesday on renewed concern about the health of banks after a source said government stress test results show Bank of America needs as much as $34 billion in capital.
The $34 billion for Bank of America
Investors fretted about dilution to shareholders or a bigger government stake in the banks if existing government-held preferred shares are converted into common stock. The results are expected to be released on Thursday.
One of the chief pullbacks here is the ongoing concerns about the results of stress tests and how much capital is going to need to be raised in the near term in the financials, said Arthur Hogan, chief market analyst at Jefferies & Co in Boston.
We certainly knew the banks were going to need more capital, it's just the matter of degree.
Additionally the New York Times reported that Citigroup may need to raise between $5 billion and $10 billion. Shares of Citigroup
S&P 500 futures fell 7.30 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures slipped 52 points, and Nasdaq 100 futures were off 11.25 points.
On the economic front, investors will be watching for the ADP report on private-sector employment. This is the first of three reports on the labor market this week, with initial jobless claims expected on Thursday and the key non-farm payroll report due on Friday.
Dow component Walt Disney Co
Shares of Dow Chemical
Among quarterly results expected for the day, technology bellwether Cisco Systems
Stocks fell on Tuesday as cautious investors fretted about impending bank stress test results and energy shares succumbed to the pressure of lower oil prices.
Tuesday's drop halted a two-day run-up that had propelled the S&P 500 into positive territory for the year-to-date. The benchmark index had risen 34 percent after touching a 12-year lows in early March.
(Editing by Theodore d'Afflisio)