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US and European market indices down

21 January 2010 07:35 (UTC +04:00)

Baku- APA-Economics. Stock futures fell Wednesday, pointing to a lower opening, following new signs China might tighten its monetary policy and after Bank of America said it remains cautious about an economic recovery, AP reported.
Bank of America Corp. provided the latest reminder that U.S. consumers are a long way from fully recovering from the worst recession since the Great Depression. In its earnings announcement, the bank’s new CEO Brian Moynihan said, "economic conditions remain fragile."
Investors have been looking for reassurances during the early parts of earnings season that consumers are rebounding and the economy is strengthening. Banks have not been able to provide that optimism in recent days.
With unemployment still at 10 percent and consumers unable to pay mortgages and other loans, it would be difficult for spending to rise sharply and provide a necessary boost to a fragile economic recovery.
Traders are also on edge ahead of new reports on housing starts and inflation at the wholesale level.
Overseas markets were lower after a newspaper report said some Chinese banks were ordered to stop lending for the rest of January after exceeding credit limits. The report came a day after a speech by Premier Wen Jiabao was seen as a sign the country might slow the flow of easy credit, which could undermine a global economic recovery.
Ahead of the opening bell, Dow Jones industrial average futures fell 54, or 0.5 percent, to 10,616. Standard & Poor’s 500 index futures fell 6.90, or 0.6 percent, to 1,138.80, while Nasdaq 100 index futures fell 11.00, or 0.6 percent, to 1,878.75.
Bank of America said it lost $5.2 billion, or 60 cents per share, during the fourth quarter. Most of the loss was tied to repaying $45 billion in government bailout money. The Charlotte, N.C.-based bank said it set aside $10.11 billion for loan losses during the quarter, an 18 percent jump from the same quarter a year earlier.
Both JPMorgan Chase & Co. and Citigroup Inc. in recent days said they are also still cautious about when the economy will recover and loan losses will start to shrink.
Wells Fargo & Co. is scheduled to report fourth-quarter results later Wednesday.
Investors are also awaiting two economic reports for further signs of economic recovery. A new housing report from the Commerce Department is expected to provide mixed signals about a recovery.
The report is expected to show new home construction rose to a seasonally adjusted annual rate of 580,000 in December, a 1 percent increase from a month earlier, according to economists polled by Thomson Reuters. However, the Commerce Department report is also expected to show applications for building permits, considered a good barometer of future activity, fell 1.5 percent to an annual rate of 580,000.
The report is due out at 8:30 a.m. EST.
A separate report due out at the same time from the Labor Department is expected to show inflation at the wholesale level -- as measured by the Producer Price Index -- was unchanged in December, after a 1.8 percent increase in November.
Core inflation, which excludes volatile energy and food prices, likely rose 0.1 percent last month.
The tame inflation report would again show inflation is not a problem and provide the Federal Reserve the room to keep interest rates at record low levels to try and help boost the economy.
Stocks rallied Tuesday as traders placed bets that the outcome of a special election in Massachusetts for an open Senate seat would make it harder for President Barack Obama to make changes to health care. That pushed health care stocks higher because it eased concerns new regulatory proposals that could eat into profits would not pass.
Scott Brown’s victory in the election gives Republicans the 41 votes necessary to block Democratic proposals, including the health care bill.
The Dow rose 116 points to close at a 15-month high.
Meanwhile bond prices rose Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.67 percent from 3.70 percent late Tuesday.
The dollar rose against other major currencies, while gold prices fell.
Overseas, China’s main Shanghai composite index dropped 2.9 percent, while Japan’s Nikkei stock average fell 0.3 percent. Britain’s FTSE 100 declined 0.8 percent, Germany’s DAX index dropped 0.5 percent, and France’s CAC-40 fell 0.7 percent.