Merrill Lynch (NYSE:MER) analysts and shareholders will be carefully watching earnings after the financial services company announced that it had adjusted the value of securities backed by subprime mortgages and other assets amid the poor credit market, according to an 8-K filing with the SEC. Many are predicting that this could put a drag on the company's earnings and further depress the stock.

"Credit market conditions have continued to remain challenging in the third quarter, and the firm, as part of its regular accounting processes, has made requisite fair value valuation adjustments as appropriate to certain of these exposures, which are reflected in our third quarter to date results," the company said in a statement. "Given current market conditions, significant risk remains that could adversely impact these exposures and results of operations."

Interestingly, the announcement comes after a series of insider purchases in not only Merrill Lynch but other large financial institutions that have felt the wrath of subprime and credit worries. Some say that this is a signal that the stocks are close to bottoming out and the problems will eventually work themselves out with or without a Fed rate cut. Whether this is true or not remains to be seen, but MER is a stock worth watching through its earnings announcement!

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