NEW YORK, Fri May 11, 2012 – Stock index futures fell on Friday and were on track to extend the week’s losses after JPMorgan Chase & Co. revealed a trading loss of at least $2 billion from a failed hedging strategy that weighed on bank shares.
The news sent shares of the Dow component down 8.1 percent to $37.42 in premarket trading, and is the latest hurdle for a sector already besieged by the sovereign debt crisis in Europe and fears of slowing growth globally.
While other gains partially offset the trading loss, JPMorgan Chase estimates the business unit with the portfolio will lose $800 million in the current quarter, excluding private equity results and litigation expenses. The bank had previously expected the unit to earn a profit of about $200 million.
Jamie Dimon, the chief executive of the biggest U.S. bank by assets, cautioned that losses could grow by another $1 billion.
“While this is an isolated incident that has nothing to do with how the economy will recover, it is very painful to hear,” said Tim Speiss, head of personal wealth advisors at EisnerAmper in New York. “Investors need to look at what this might do to JPMorgan’s equity value, and whether it is something that could trouble the whole sector.”
Bank of America Corp. fell 3 percent to $7.47 before the bell while Citigroup Inc. lost 3.8 percent to $29.50 and the Financial Select Sector SPDR was off 1.9 percent to $14.70.