Futures drop as details of U.S. bailout awaited
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Mon, 22 Sep 2008 12:05:07 GMT |
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By Ellis MnyanduNEW YORK (Reuters) - Stock index futures fell on Monday as investors awaited details on Washington's planned $700 billion bailout to stem financial sector turmoil.Investors worried Congress would seek to change the Bush administration's proposal and paused after Friday's surge when Treasury Secretary Henry Paulson announced a plan that could reshape the U.S. financial landscape.Goldman Sachs and Morgan Stanley , whose shares were pummeled last week, are abandoning their investment bank model of two decades. They will become bank holding companies with an additional safety net from the Federal Reserve."Some skepticism about whether or not the bill is going to be passed the way Paulson wants it to be might be giving the market a bit of a hiccup," said Peter Cardillo, chief market economist at Avalon Partners in New York."Will they add things to it? So that raises the level of skepticism. Secondly, what does it mean for inflation? This could be very inflationary."Officials have said the plan, in which the government will buy soured mortgage-related debt from financial institutions, will cost taxpayers hundreds of billions of dollars.S&P 500 futures fell 7.10 points but were above 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 dropped 78 points and Nasdaq 100 futures shed 10.75 points.Rising oil prices could be another headwind for the market, with U.S. front-month crude up $2.28 at $107.13 a barrel as the dollar weakens.Sweeping government measures to rescue the financial system and restore confidence in shaky markets spurred a huge relief rally in U.S. stocks on Friday, ending a week that saw the most dramatic reshaping of the financial landscape since the Great Depression.Abandoning their investment banking business model means Goldman Sachs and Morgan Stanley will be regulated by the Fed and receive protection from the financial storm that destroyed their rivals. Their move effectively ends Wall Street's investment banking model.In other news, asset manager Legg Mason Inc is looking to go private, The New York Post reported, citing people familiar with the situation.(Editing by Kenneth Barry)
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