U.S. stock-index futures dropped after American Express Co. said customer defaults are rising and Bank of America Corp. agreed to buy Countrywide Financial Corp. for less than its market value. American Express, the third-largest U.S. credit-card network, declined after saying earnings will be hurt by unpaid loans.

Countrywide, the biggest U.S. mortgage company, retreated after agreeing to sell itself for 7.6 percent less than the closing price yesterday. Merrill Lynch & Co. fell after the New York Times reported the world's largest brokerage may write down $15 billion tied to mortgages. Standard and Poor's 500 Index futures expiring in March lost 8.2 to 1,412.8 as of 8:25 a.m. in New York. Dow Jones Industrial Average futures decreased 59 to 12,785. Nasdaq-100 Index futures lost 10.25 to 1,950.5.

``We've only seen the tip of the iceberg in the ongoing subprime crisis,'' said Jens Ehrhardt, who oversees the equivalent of $12 billion for Munich-based Dr. Jens Ehrhardt Kapital AG. The lower-than-expected profit outlook at American Express follows a warning yesterday from Capital One Financial Corp. that earnings trailed its forecast as more borrowers failed to repay their debts.

The Dow average dropped 103 points yesterday before recovering after Federal Reserve Chairman Ben S. Bernanke signaled he may cut interest rates further and investors speculated Countrywide would be bought.

American Express Drops

The S&P 500 has gained 0.6 percent this week and the Dow average has rallied 0.4 percent. The Nasdaq Composite Index has dropped 0.6 percent. American Express fell $3.72 to $45.20. The company said it will take a fourth-quarter charge of $275 million to cover rising customer defaults.

First-quarter earnings from continuing operations will be less than 90 cents a share, American Express said. That trailed the 93-cent average estimate of 12 analysts surveyed by Bloomberg. Countrywide dropped $1.01 to $6.74. Bank of America, the biggest U.S. bank by market value, agreed to buy Countrywide for about $4 billion, five months after making a money-losing $2 billion investment in the unprofitable mortgage lender. Countrywide shares rose more than 50 percent in NYSE trading yesterday, valuing the company at about $4.5 billion. Bank of America gained 15 cents to $39.45 today.

Merrill Writedown

Merrill Lynch slipped $1.28 to $50.75. The firm is expected to disclose the loss when it reports earnings next week, the Times reported, citing people briefed on the plan. Merrill is trying to raise $4 billion from investors in the U.S., Asia and the Middle East, the Times reported. Merrill spokeswoman Jessica Oppenheim declined to comment when contacted by Bloomberg News. Merrill Lynch is a passive, minority owner of Bloomberg LP, the parent of Bloomberg News. Citigroup Inc. slid 41 cents to $27.70. The biggest U.S. bank may post about $14 billion of writedowns for the fourth quarter, JPMorgan analysts estimated.

Investment banking revenue ``likely'' fell last quarter, in part because of a drop in trading flows, analysts including Vivek Juneja wrote in a report dated today. JPMorgan declined 33 cents to $41. The third-biggest U.S. bank agreed to buy mortgages valued at 2.2 billion pounds ($4.3 billion) from Northern Rock Plc, the U.K. bank bailed out by the Bank of England. The price JPMorgan is paying is 2.25 percent, or about 50 million pounds, higher than the balance sheet value of the assets, the Newcastle, England-based bank said. The U.S. trade deficit probably widened in November for a third consecutive month as Americans spent a record amount on imported oil, economists said ahead of a government report today. The Commerce Department figure is due at 8:30 a.m. in Washington. Washington Mutual Inc. climbed $1 to $15.16. JPMorgan Chase & Co., the third-biggest U.S. bank, may be interested in buying the largest U.S. savings and loan, CNBC on-air editor Charlie Gasparino reported, without citing anyone specific.