US STOCKS - Futures falter on fresh toxic asset fears


July 15, 2010 Updated Apr 7, 2009 at 8:02 AM CDT

* Banks fall after news of an IMF report on toxic assets

* Alcoa to kick off earnings season

* RBC upgrades Microsoft, seven others

* FUTURES: Dow off 123, S&P 500 off 14.40, Nasdaq off 18.25

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stock futures pointed to
a lower open Tuesday after it was reported the International
Monetary Fund was set to forecast toxic assets on the balance
sheets of financial sheets could reach $4 trillion.

The report comes on the heels of comments from veteran
analyst Mike Mayo, of Calyon Securities, who said on Monday
banks still face fallout from excessive risk-taking and warned
of rising loan losses by the end of 2010.

Bank of America tumbled 3.6 percent to $7.21 in
premarket trade, while Citigroup dropped 4.4 percent to
$2.60. The renewed worries about banks came after stocks
rallied off 12-year lows in the last month, fueled in part by
reassuring comments from major banks about their performance in
the beginning of the year.

"The real jitters here for the market is the report from
the IMF suggesting that toxic debts could actually spiral to $4
trillion," said Peter Cardillo, chief market economist at
Avalon Partners in New York.

"You had some negative analyst reports yesterday on the
banks and this IMF report certainly is not helping. It just
basically is reopening old worries."

S&P 500 futures fell 14.40 points and were below
fair value, a formula that evaluates pricing by taking into
account interest rates, dividends and time to expiration on the
contract. Dow Jones industrial average futures slid 123
points, and Nasdaq 100 futures shed 18.25 points.

Jitters over the banks is compounded by worries over the
earnings season which kicks off after the close as investors
braced for aluminum producer Alcoa's quarterly results.

Alcoa shares fell 2.4 percent in premarket trade ahead of
the release of their results.

Earnings for S&P 500 companies are expected to fall by 36.7
percent, according to Thomson Reuters data.

Shares of Microsoft may move higher after RBC
Capital Markets upgraded company to "outperform" from "sector
perform" along with seven other software companies, citing more
reasonable valuations and a decreased risk to negative earnings

Also on the research front, American Express was
upgraded to a "hold" from a "sell" at Citigroup on a more
balanced risk to reward basis.

In Europe, shares fell for a third consecutive session as
financials weakened along with U.S. futures, reigniting fears
over the global banking sector

In acquisition news, about half a dozen investment managers
have put forward bids, ranging from $400 million to $800
million for troubled insurer American International Group's
asset management business, the Wall Street Journal

Since hitting a bear market closing low on March 9, the S&P
500 is up more than 23 percent, boosted by hopes that the
economic slump is moderating and banks are stabilizing as
policy-makers continue an aggressive campaign to shore up the

The recent momentum in financials and sectors such as
technology, which analysts say may lead a recovery, helped
the Dow rack up its best four-week stretch since 1933 despite
yesterday's decline.
(Reporting by Chuck Mikolajczak; Editing by Theodore

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