Stock futures pointed slightly lower Monday, as investors tread cautiously ahead of the unofficial start to earnings season with a report from Alcoa.
Wall Street is expecting fourth-quarter and full-year numbers to be particularly bleak, especially after several companies warned last week that they are being hit hard by the recession.
EARNINGS WOES: Gloomy financial outlook drags profit predictions down
Alcoa (AA), which releases its fourth-quarter results after the market closes Monday, said last week it would cut 13,500 jobs, or 13% of its work force, and sharply reduce production as it struggles with falling demand due to the worsening recession overseas.
Analysts are expecting Alcoa to report a loss of 10 cents per share, according to a poll by Thomson Reuters.
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Chipmaker Intel (INTC), which reports results Thursday, and Wal-Mart Stores (WMT) offered downbeat forecasts as well last week, adding to investors' anxieties. The corporate warnings have made it difficult for investors to keep shrugging off bad economic data, as they had been in recent sessions. If companies are struggling, the recession may last longer than the market had anticipated.
And the warnings are expected to continue. Analysts predict many more companies will be forced to reduce or withdraw their guidance for this year amid the economic uncertainty.
"There will probably be some reductions in guidance or some watering down of guidance," said Ken Mayland, president of ClearView Economics. "That is probably going to prove to be a bit unnerving as well."
Wall Street is coming off of its worst week since November. The Dow Jones industrial average fell 4.8% for the week, the Standard & Poor's 500 index slid 4.5% and the Nasdaq composite index lost 3.7%.
On Friday, stocks faltered as the Labor Department's employment report showed the unemployment rate jumped to 7.2% from 6.8% in November, more than the 7% economists predicted.
There are no economic reports scheduled Monday, but investors will likely be anxious ahead of the Federal Reserve's beige book, its assessment of the economy by region. The report, which will be released Wednesday, provides details about the strengths and weaknesses in each part of the country.
Ahead of the market's open, Dow Jones industrial average futures fell 12, or 0.14%, to 8,511. Standard & Poor's 500 index futures fell 2.80, or 0.32%, to 882.70, while Nasdaq 100 index futures fell 0.50, or 0.04%, to 1,221.
The financial sector will likely remain in focus Monday, as Citigroup (C) nears a deal to combine its brokerage business with Morgan Stanley (MS).
Meanwhile, much attention will be given to activity in Washington, ahead of President-elect Barack Obama's inauguration next week. Obama is pushing lawmakers to release the remaining $350 billion of the financial industry bailout funds. Several senators have predicted a vote in Congress is likely as early as this week. Investors are also awaiting more details of Obama's stimulus package, which includes big tax cuts and has an estimated price tag of nearly $800 billion.
Bond prices fell early Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.45% from 2.36% late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose slightly to 0.08% from 0.07% late Friday.
The dollar rose against other major currencies, while gold prices fell.
Light, sweet crude fell $2.27 to $38.56 in electronic premarket trading on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average fell 0.45%. Hong Kong's Hang Seng index dropped 2.83%. In afternoon trading, Britain's FTSE 100 was down 0.65%, Germany's DAX index was down 0.45%, and France's CAC-40 was down 0.80%.
