MarketWatch.com - Pre-Market Indications

Monday, April 19, 2010

Indications: U.S. stock futures drop as Goldman reverberates

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By Steve Goldstein & Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- U.S. stock futures fell Monday in the aftermath of the Goldman Sachs Group Inc. fraud charges and as Europe remained enmeshed in an aviation crisis following last week's volcanic eruption in Iceland.

S&P 500 futures fell 5.5 points to 1,184.8, and Nasdaq 100 futures fell 6 points to 2,003.75. Futures on the Dow Jones Industrial Average dropped 49 points.

Fraud allegations around Goldman Sachs

WSJ's Greg Zuckerman explains the circumstances surrounding the fraud allegations against Goldman Sachs to Simon Constable.

U.S. stocks slumped Friday after the Securities and Exchange Commission brought fraud charges against Goldman Sachs relating to a derivative it sold to European investors, with the agency saying it was examining similar deals across the industry. See April 16 story about the SEC's complaint againt Goldman Sachs.

Goldman Sachs slumped nearly 13%, and major benchmarks dropped across the globe, with the Dow Jones Industrial Average forfeiting 125 points, the Nasdaq Composite losing 34 points and the S&P 500 declining 19 points. Asian stocks slumped Monday in their first reaction to that news, as well as to steps taken by China to tamp its property market.

Goldman shares /quotes/comstock/13*!gs/quotes/nls/gs (GS 160.70, -23.57, -12.79%) dipped 1.6% in pre-market trades Monday.

"While it is still open whether the SEC's case will be successful, the reputational damage can be immense. And potentially not for Goldman Sachs alone, as it was not only Goldman Sachs that was involved in such transactions," said Philip Gisdakis, a strategist at UniCredit.

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Rival Citigroup Inc.'s shares /quotes/comstock/13*!c/quotes/nls/c (C 4.56, -0.25, -5.20%) were up 0.9% in pre-open trade after the banking powerhouse reported quarterly results that exceeded expectations. Expanded Citigroup news.

Analysts at Nomura say the recent bank-share rally has further to run. "On one times book, the global bank sector is not only cheaply priced, but discounts very little of the on-going benefits of a steeply sloped yield curve for sector earnings and rapidly improving credit quality for the balance sheet," strategists said in a note to clients.

Halliburton /quotes/comstock/13*!hal/quotes/nls/hal (HAL 31.64, -0.88, -2.71%) reported first-quarter profit slumped almost 46%, with shares of the Houston oil-services company off 1.5% ahead of Wall Street's start.

Eli Lilly & Co. shares /quotes/comstock/13*!lly/quotes/nls/lly (LLY 36.54, -0.18, -0.49%) were also off, down 2.2%, after the drug manufacturer lowered its 2010 earnings estimates.

International Business Machines /quotes/comstock/13*!ibm/quotes/nls/ibm (IBM 130.63, -0.26, -0.20%) figures due after the close of trade.

On the economic docket, March leading indicators is due for release.

Airlines including British Airways, Lufthansa and Air France-KLM dropped in Europe trade as the closure of northern European airspace continued for a fifth day.

Air Canada and Continental Airlines /quotes/comstock/13*!cal/quotes/nls/cal (CAL 22.98, -0.79, -3.32%) canceled some flights from Newfoundland as volcanic ash moved across the Atlantic, according to press reports.

The dollar dropped against the Japanese yen and rose against the euro /quotes/comstock/21o!x:seurusd (CUR_EURUSD 1.3431, -0.0044, -0.3265%) . The British pound /quotes/comstock/21o!x:sgbpusd (CUR_GBPUSD 1.5271, -0.0018, -0.1151%) was notably weaker after weekend polls show the Liberal Democrats ahead, which if carried through to Election Day would likely lead to a coalition government comprising the incumbent Labour Party and the Lib Dems.

Oil futures dropped sharply, losing around $2 a barrel, and gold futures dropped by $6.50 an ounce.

Steve Goldstein is MarketWatch's London bureau chief. Kate Gibson is a reporter for MarketWatch, based in New York.


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