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Stock Futures Indicate Mixed U.S. Open

Mike Taylor

Premarket futures were forecasting a narrowly mixed open for stocks in the U.S., as investors contended with a mixed bag of reports about the highly volatile financial sector.

Futures for the S&P 500 were up 2 points at 1254 and were 3.5 points above fair value. Nasdaq futures were up a point to 1783, but were 1.2 points below fair value.

On Thursday, the major indices opened with wide losses as traders hammered away at financial-services names Lehman Brothers (LEH Quote) and Washington Mutual (WM Quote). However, stocks staged a sharp rally in the final minutes of trading, sending WaMu shares higher as Lehman continued to languish.

Following the market's close, The Wall Street Journal reported that Lehman was shopping itself to, among others, Bank of America (BAC Quote). The Journal and Reuters both listed British bank Barclays (BCS Quote) as another potential buyer. A solution to Lehman's recent woes could help restore confidence in U.S. financial markets.

Washington Mutual, meanwhile, said it has $50 billion in liquidity and announced that its retail deposit base remained at levels reached at the end of 2007. The company also said it expects its third-quarter loan-loss provision to be about $4.5 billion, down from $5.9 billion in the second quarter.

Ratings agency Moody's downgraded WaMu's credit rating to below investment grade, citing "reduced financial flexibility." Bloomberg also reported that the company may have to sell some of its deposits and branches as it struggles to raise capital. Thursday's late rally aside, shares of the Seattle bank have been pounded in recent days on fears about its sizable exposure to bad mortgage debt.

Reflecting broader trouble in credit markets, a sale of $228 million in Clear Channel bonds last week failed to attract as many buyers as underwriters had anticipated.

In the realm of commodities, crude oil was rising $1.51 to $102.38 a barrel. Oil refiners were shutting down some production as Hurricane Ike menaced the Texas Gulf Coast. Gold was up $12.70 to $758.20.

As for economic data, the Bureau of Labor Statistics is expected to release its August producer price index. The Census Bureau's retail sales figures are also due, as is a consumer sentiment survey from the University of Michigan.

Longer-dated U.S. Treasury securities were declining in price. The 10-year note was down 5/32 to yield 3.66%, and the 30-year lost 10/32 to yield 4.24%. The dollar was declining vs. the euro and pound but rising against the yen.

European indices were marking gains, while Asia was mixed. The FTSE in London and the Dax in Frankfurt were trading higher. Japan's Nikkei closed with gains, while the Hang Seng in Hong Kong took losses.