* 10 banks being tested to be told to raise capital-source
* Kraft shares rise after quarterly results
* Bernanke testimony on tap
* Futures down: S&P 3.80 pts, Dow 24 pts, Nasdaq 3 pts
* For up-to-the-minute market news click []
(Adds details, quote, byline, recasts)
By Leah Schnurr
NEW YORK, May 5 (Reuters) - Wall Street indexes pointed to
a lower open on Tuesday with investors set to book profits a
day after the S&P 500 turned positive for the year, while
financials were in focus as the market awaits stress tests
results from the government.
According to a source familiar with official talks between
banks and regulators, about 10 of the 19 largest U.S. banks
that have been put through government stress tests will be
instructed by regulators to raise more capital.
The banks have been negotiating with the regulators about
the depth of their capital needs, should the recession prove to
be deeper and longer than anticipated. For details, see
[]
Investors were hopeful that the amount of capital banks
need to raise will be manageable but some jitters remain over
any negative surprises that could be revealed.
"Right now the market is in a heightened sensitivity mode
where any information will be absorbed, processed and acted on
in a very quick manner," said Andre Bakhos, president of
Princeton Financial Group in Princeton, New Jersey.
"Although the market appears to have discounted much of the
bad news given the positive behavior of the financials, there
remains an uneasy queasiness about what will be said (in the
stress tests)," Bakhos said.
Federal Reserve Chairman Ben Bernanke will testify on the
economy before the Joint Economic Committee at 10:00 a.m. (1400
GMT). Investors will be keen for any new indication the
recession is easing to provide support for recent optimism over
the economy.
S&P 500 futures <SPc1> fell 3.80 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 <DJc1> lost 24
points, and Nasdaq 100 <NDc1> futures were off 3 points.
The S&P 500 is now up 34 percent from its 12-year closing
low on March 9 but it is still off 42 percent from its October
2007 record high.
Among financial shares, Wells Fargo <WFC.N> was off 2.2
percent to $23.71 and Bank of America <BAC.N> eased 1.8 percent
to $10.19.
The final results on the stress tests are expected to be
reported on Thursday. Any news that points to more
stabilization in the sector will be a positive for investors as
authorities have said shoring up the financial system is key to
reviving the recession-hit economy.
Dow component Kraft Foods <KFT.N> rose in premarket trade
after the maker of household brands including Oreo cookies and
Maxwell House coffee reported a higher profit. Like many
companies this earnings season, Kraft said it was helped by
raising prices and cutting costs, sending its shares up 3.3
percent at $25.06. [].
On the data front, a reading on the Institute for Supply
Management's nonmanufacturing index for April is expected later
in the morning.
Stocks rose on Monday, driving the S&P 500 into positive
territory for the year as investors bet banks' capital
shortfalls may be manageable and housing data fueled hopes the
recession is easing.
(Editing by Theodore d'Afflisio)
