NEW YORK – Wall Street appeared ready to extend its losses Thursday, after a discouraging outlook from JPMorgan Chase & Co. reinforced investors' fears that the financial sector's troubles are far from over.
The huge banking company managed to avoid a loss, reporting better-than-expected earnings of $702 million, or 7 cents per share, in the October-December quarter. Analysts had predicted the company would break even.
Still, the results were not enough to ease the market's concerns. JPMorgan said it increased its reserves to cover potential loan losses by $4.1 billion, and Chief Executive Jamie Dimon called the quarter "very disappointing." Higher loan losses are likely if the economy deteriorates further, which is a "distinct possibility," Dimon said.
JPMorgan is the first big U.S. bank to release fourth-quarter earnings, and analysts and investors are looking at it for signs of how the rest of the industry may be faring. But the bank, which bought failing Bear Stearns Cos. and Washington Mutual Inc. last year, is viewed as one of the stronger players in the industry, so results from other big banks could prove even worse.
Investors, who have been selling stocks for much of the new year, are likely to remain on edge Thursday ahead of an earnings report after the markets close from Intel Corp. and a batch of economic readings.
Intel, the world's largest maker of computer chips, has already warned investors that its fourth-quarter revenue will fall short of its initial estimates. The market is hoping to gain some sense of the company's outlook for the current year.
Meanwhile, the Labor Department is expected to say that new claims for unemployment benefits rose last week after two weeks of declines. And economists are expecting the Labor Department's Producer Price Index, which measures the costs of goods before they reach consumers, to show a drop of 2 percent in December, a sign of waning demand. Both reports will be released at 8:30 a.m. Eastern time.
Dow Jones industrial average futures fell 69, or 0.85 percent, to 8,090. Standard & Poor's 500 index futures dipped 8.10, or 0.96 percent, to 831.70, while Nasdaq 100 index futures fell 17.25, or 1.48 percent, to 1,148.25.
Investors' late 2008 enthusiasm has been sapped by increasingly gloomy outlooks for companies from banks to retailers to energy producers. On Wednesday, a worse-than-expected report on retail sales and growing concerns about the financial sector sent the Dow down nearly 250 points, and left the other major indexes with a loss of 3 percent. The Dow has now fallen for six straight sessions.
The market has been particularly concerned about the stability of the financial industry, fearful that banks could need more assistance from the federal government, which has already pumped $250 billion into the ailing sector. The Wall Street Journal reported Thursday that the government is close to finalizing a deal to provide billions of additional aid to Bank of America Corp. to help it close its purchase of brokerage Merrill Lynch & Co. Citing an unnamed source close to the talks, the Journal said the bank is unlikely to complete the acquisition without additional funds because of Merrill's hefty losses in the fourth quarter.
Earlier this week, Citigroup said it would give control of its Smith Barney brokerage business to Morgan Stanley in an effort to raise much-needed cash. Analysts suspect the bank will shed additional businesses in the near future.
Bond prices rose early Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 2.18 percent from 2.20 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, was 0.09 percent, down from 0.10 percent late Wednesday.
The dollar was mixed against other major currencies early Thursday, while gold prices rose.
Light, sweet crude rose 15 cents to $37.43 a barrel in electronic premarket trading on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average dropped 4.92 percent and Hong Kong's Hang Seng index tumbled 3.37 percent. In afternoon trading, Britain's FTSE 100 was down 0.37 percent, Germany's DAX index fell 0.33 percent, and France's CAC-40 fell 1.00 percent.