US Stocks Lower as GE Fails to Motivate Investors

July 11, 2008 6:23:42 AM PDT
Wall Street headed for a moderately lower open Friday after General Electric Co.'s quarterly report failed to motivate investors anxious about the financial industry and a new record oil price. GE, the conglomerate that owns everything from television network NBC to jet engine plants, reported second-quarter profits that met analysts' expectations. However, the outlook across its business lines was mixed - and overall results were not convincing enough to send futures higher.

The results were not enough to distract investors from broader worries that continued to depress the market, including oil prices, which on Friday vaulted to a new intraday record of $145.98 a barrel.

And financial companies with exposure to mortgage bonds will continue to be under investor scrutiny. Fannie Mae and Freddie Mac have plunged in the past few sessions, and there is growing speculation on the Street that the government might have to step in to prevent a collapse.

Citigroup Inc. announced it will sell its German retail banking operation to France's Credit Mutuel for $7.7 billion. After the deal closes, Citi said it will book a $4 billion gain - an amount that could be badly needed as the company is expected to take further write-downs during the second quarter.

Investors are also awaiting economic data including a report on the trade deficit in May and a reading on consumer confidence for July.

Dow Jones industrial average futures fell 62, or 0.61 percent, to 11,155. Standard & Poor's 500 index futures fell 7.70, or 0.61 percent, to 1,246.80, while Nasdaq 100 index futures fell 9.50, or 0.52 percent, to 1,834.75.

Light, sweet crude rose $3.53 to $145.30 per barrel in premarket electronic trading on the New York Mercantile Exchange. Behind the rise are concerns about a disruption to tight global supplies amid tensions over Iran's launch of test missiles and the possible renewal of oil-related violence in Nigeria.

Bond prices edged lower ahead of the economic reports. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.82 percent from 3.80 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.

The University of Michigan Consumer Sentiment index, which sits at multiyear lows, is expected to drop further amid higher gasoline prices and a weakening employment market. The report is due at 10 a.m. EDT.

And, economists expect that the Commerce Department will report that the U.S. trade deficit increased in May due to soaring oil prices and higher imports of consumer goods. The trade gap is forecast to rise to $62.1 billion from $60.9 billion in April, according to Thomson/IFR. The report is due at 8:30 a.m. EDT.

Overseas, Japan's Nikkei stock average fell 0.21 percent. In morning trading, Britain's FTSE 100 fell 0.87 percent, Germany's DAX index declined 1.53 percent, and France's CAC-40 fell 1.36 percent.