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Stock Futures Tumble on JPMorgan Loss


NEW YORK (TheStreet) -- Stock futures were retreating from the fallout of JPMorgan Chase's (JPM) announcement that the bank's Chief Investment Office suffered a trading loss of $2 billion.

The loss took place in its synthetic credit portfolio, offset by a $1 billion securities gain, as a strategy to re-hedge its portfolio backfired.

Futures for the Dow Jones Industrial Average was falling 77 points, or 60 points below fair value, at 12,757. Futures for the S&P 500 was down 9.3 points, or 6.7 points below fair value, at 1348, and Futures for the Nasdaq was down 12 points, or 6 points below fair value, at 2607.

Stocks finished mixed on Thursday with the Dow and the S&P 500 booking modest gains, but with the Nasdaq unable to overcome Cisco's (CSCO) deep decline.

After a week of drama in Europe that unfolded after the Greek parliamentary and French presidential elections last weekend, and Spain's rescue of its fourth-largest bank, the U.S. financial sector was stealing some of the thunder following JPMorgan's disturbing revelation.

As a result of the "egregious" trading mistake, according to JPMorgan CEO Jamie Dimon, the bank's corporate division could post a $800 million loss after tax, compared to its earlier guidance of about $200 million.

The bank will continue to reposition its portfolio; there could be more volatility from this repositioning that could result in losses of up to $1 billion in the current quarter.

Shares of JPMorgan Chase were tumbling 7.1% ahead of the open and other financial stocks were falling as well. Among them were Citigroup (C), down 2.5%; Morgan Stanley (MS), down 2.8%; Bank of America (BAC) down almost 2%; and Goldman Sachs (GS) fell 2.7%.

U.S. financials are a big fat question mark again, after finally providing some market leadership in the first quarter, which is one of the hallmarks of a healthy bull market.

In Europe, London's FTSE was slipping 0.3% and the DAX in Germany was down 0.3% as well.

While JPMorgan's losses were dominating the headlines, the troubles in Europe continued to lurk with Greece still in the process of trying to cobble together a government and Spain expected to reveal the details of its plan to bolster the nation's troubled banking sector.

The European Commission warned Friday that Spain was at risk of seriously missing its deficit targets this year and next year.

In U.S. economic news Friday, the Labor Department reported that the producer price index for April fell 0.2%, when economists, on average, expected it to be flat. The core PPI, which excludes food and energy, rose 0.2% as expected.

The University of Michigan consumer sentiment survey for May arrives at 9:55 a.m. EDT. Economists sees a tick lower to 76 from a prior reading of 76.4.

In Asia, the Hang Seng Index in Hong Kong finished down 1.3% and Japan's Nikkei average fell 0.6%.

The benchmark 10-year Treasury was rising 2/32, diluting the yield to 1.866%. The dollar was up 0.1%, according to the dollar index.

In commodity markets, the June crude oil contract was off $1.10 at $95.98 a barrel. June gold futures were falling $16 to $1,579.50 an ounce.


In corporate news, Arena Pharmaceuticals (ARNA) said Thursday Food and Drug Administration advisers recommended approval of the company's diet drug lorcaserin. Arena said it's working with the agency as it finishes its review. A final decision from the FDA could be made June 27. Lorcaserin could be the first new prescription diet drug in over a decade in the U.S.

Shares of Arena Pharmaceuticals skyrocketed 96.72% in premarket trading Friday.

Specialty women's apparel chain Cache (CACH) reported a first-quarter loss of $1.2 million, or 9 cents a share, wider than the year-earlier loss of $772,000, or 6 cents a share. Analysts, on average, expected a loss of 9 cents a share.

ReneSola (SOL) reported first-quarter a loss of $40.2 million, or 23 cents a share, a reversal from year-earlier earnings of $43.3 million, or 24 cents a share. On average, analysts were expecting earnings of 31 cents a share.

-- Written by Andrea Tse in New York.



>To contact the writer of this article, click here: Andrea Tse.

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