Futures falter on new toxic asset worry

US stock futures pointed to a lower open on Tuesday on fresh worries over the amount of toxic assets on bank balance sheets and investors braced for what is expected to be another dismal earnings season. Bank shares traded lower before the open on the news of the IMF report after it was reported the Fund was set to forecast toxic assets on the balance sheets of financial corporations could reach $4 trillion. Bank jitters have resurfaced as investors also gird themselves for a weak round of earnings, starting with Alcoa Inc after the close today. Alcoa shares fell 2.4 per cent in premarket trade ahead of the release of their results. Earnings for S&P 500 companies are expected to fall by 36.7 per cent, according to Thomson Reuters data. The IMF 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 shares traded lower before the open on the news of the report, which comes 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 Select Sector SPDR Financial ETF fell 2.5 per cent to $9.19. "We have earnings season now and the markets are clearly telegraphing there's going to be some more negative news in the financial names," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. "The market knows that there is more (bad news) to come out," he added. S&P 500 futures fell 11.80 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 96 points, and Nasdaq 100 futures shed 13.75 points. Shares of Microsoft may move higher after RBC Capital Markets upgraded the company to "outperform" from "sector perform" along with seven other software companies, citing more reasonable valuations and a decreased risk to negative earnings revisions. Also on the research front, Citigroup upgraded American Express to a "hold" from a "sell" on a more balanced risk to reward basis. 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 reported. Despite yesterday's decline, since hitting a bear market closing low on March 9, the S&P 500 is up more than 23 per cent as hopes rose the economic slump is moderating and banks are stabilising as policy-makers continue an aggressive campaign to shore up the system.