BLBG: U.S. Stock Futures Drop on Jobless Data, Higher Borrowing Costs
By Michael Patterson and Lynn Thomasson
Oct. 2 (Bloomberg) -- U.S. stock futures tumbled as jobless claims climbed to a seven-year high and rising borrowing costs spurred concern companies will struggle to secure financing even as Congress moved closer to approving a plan to shore up banks.
General Electric Co. lost 6.7 percent as people close to the deal said the company may sell shares for less than yesterday's closing price. Wal-Mart Stores Inc. and Nike Inc. declined after first-time applications for unemployment benefits topped economists' estimates. National City Corp., Ohio's biggest bank, rallied 14 percent and Regions Financial Corp., Alabama's largest, rose 10 percent after the Senate approved the plan to buy troubled assets from financial firms.
``The fact that banks are still being cautious, that we're seeing companies finding it hard to raise debt, means people are going to lose their jobs and that has knock-on effects for the whole economy,'' said Andy Lynch, who manages about $3 billion at Schroder Investment Management Ltd. in London.
Futures on the Standard & Poor's 500 Index expiring in December lost 15, or 1.3 percent, to 1,153.4 at 8:36 a.m. in New York. Dow Jones Industrial Average futures lost 114 to 10,773. Nasdaq-100 Index futures slipped 1.4 percent to 1,556.75. European stocks advanced, while Asian shares dropped.
``After the eventual passage, the market focus will also move gradually from the financial sector to the impact on the real economy,'' said Cho Min Keon, a fund manager at Kyobo AXA Investment Managers Co. in Seoul, which manages the equivalent of $578 million in equities.
The S&P 500 has slumped 21 percent this year as the subprime mortgage crisis brought down banks including Lehman Brothers Holdings Inc. and made borrowing more expensive for companies and consumers. Billionaire Warren Buffett, the world's preeminent stock picker, described the world's largest economy yesterday as being ``flat on the floor'' after a cardiac arrest.
GE, which got a $3 billion investment from Buffett yesterday, dropped 6.7 percent to $22.86. The Fairfield, Connecticut-based company may sell shares to investors at $22.25 to $22.50 each, based on information from banks managing the offering.
The range is indicative and the offering is still ongoing, said two people close to the sale who declined to be identified before GE makes a statement. The shares fell 3.9 percent to $24.50 in New York trading yesterday.
Caterpillar, the largest maker of earthmoving equipment, fell 1.7 percent to $56. Deere, the world's largest maker of tractors, lost 2.1 percent to $45.75. 3M Co., the maker of 55,000 products from Post-it Notes to electronic road signs, slipped 0.7 percent to $66.92 in Germany. Hewlett-Packard Co., the biggest personal-computer maker, declined 40 cents to $44.57.
Factory orders probably dropped 3 percent, the most since August 2007, after advancing 1.3 percent in July, according to the median forecast in a Bloomberg News survey. Banks have become reluctant to lend as losses mount, making it harder for companies to obtain the financing needed to investment in new equipment. The Commerce Department report is due at 10 a.m. in Washington.
EBay Inc., the largest Internet auction company, was downgraded to ``equal-weight'' from ``overweight'' at Morgan Stanley, which said ``trends deteriorated more than expected'' in the third quarter. The shares lost 0.1 percent to $20.83 in trading before the official open of U.S. exchanges.
Goldman, which converted to a bank holding company last month after short-term lending markets froze, gained 1.3 percent to $136.20 in early trading. Smaller rival Morgan Stanley added 1.4 percent to $24.75.
The financial-market rescue legislation, which the House likely will act on tomorrow, passed the Senate on a 74-25 vote. It would give the Treasury Department authority to buy troubled assets, chiefly mortgage-backed securities that are burdening financial institutions. The Senate added the tax provisions to woo Republican votes in the House, where an earlier version of the bailout plan failed by 12 votes on Monday and sent the Dow average to a 777-point plunge.
The U.S. Securities and Exchange said it will extend a prohibition on short-sales of financial stocks, keeping restrictions on bets against companies' shares in place while Congress works on the bailout plan.
Bank shares also got a boost after UBS AG, the European lender with the most losses from the global credit crisis, said it had the first profitable quarter in more than a year.
Europe's Dow Jones Stoxx 600 Index climbed 1.5 percent, while MSCI Asia Pacific Index dropped 1.4 percent. U.S. Treasuries rose for a second day.
To contact the reporters on this story: Michael Patterson in London at firstname.lastname@example.org; Patrick Rial in Tokyo at email@example.com.