Stock index futures pointed to a fall of about 1 percent at the open on Monday as investors paused after a strong run and several major banks said they will issue nearly $7 billion in new stock.
U.S. Bancorp aims to raise $2.5 billion, BB&T will offer $1.5 billion in common stock, and Capital One will issue $1.75 billion in common shares, all to repay TARP government investments.
U.S. Bancorp lost 4 percent to $19.75, and Capital One fell 8.4 percent to $28.70, while BB&T dropped 5 percent $24.99.
There is more paper coming into the marketplace, it will be interesting to see how much the market can bend here, said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey.
We're adding another variable with yet another unknown outcome, he continued. We have just come off a rally of almost 6 percent last week, and we're up on the year now. When there are swings of that magnitude it suggests a very emotional market.
A speech by U.S. Federal Reserve Chairman Ben Bernanke on the state of the financial system after the market closes will keep the spotlight on what's ahead for banks.
S&P 500 futures fell 11.2 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 slid 79 points, and Nasdaq 100 futures were off 15.50 points.
Last week bank stress test results and optimism on the economy boosted the S&P 500 index into positive territory for the year and the Nasdaq closed out its ninth week of gains.
American International Group Inc
Since reaching a floor in early March, the Dow Jones industrial average is up 32.5 percent, and the S&P 500 is up 39.4 percent.
(Reporting by Edward Krudy; editing by Jeffrey Benkoe)