BLBG: U.S. Stock-Index Futures Drop After Consumer Spending Declines
By Sarah Jones and Rita Nazareth
Oct. 30 (Bloomberg) -- U.S. stock futures fell, with the Standard & Poor’s 500 Index poised to extend its second straight weekly retreat, after consumer spending dropped for the first time in five months. The dollar and Treasuries gained, while commodities decreased.
Caterpillar Inc. and American Express Co. slid after Commerce Department figures showed a 0.5 percent decrease in purchases in September. MetLife Inc. fell 2.3 percent after the biggest U.S. life insurer posted its third straight loss. Chevron Corp. rose after profit beat estimates. The S&P 500 surged the most since July yesterday as the government said the economy returned to growth following the worst contraction in seven decades.
“The stock market got a little tired after a rally of that magnitude yesterday,” said Malcolm Polley, chief investment officer at Stewart Capital Advisors in Indiana, Pennsylvania, which manages $1 billion. “Third-quarter GDP numbers were good, the worst is behind us, but consumer spending is not sustainable yet. Valuations are probably ahead of where they should be.”
Futures on the S&P 500 index expiring in December declined 0.5 percent to 1,056.4 at 9:07 a.m. in New York. Dow Jones Industrial Average futures fell 0.4 percent to 9,864, while Nasdaq-100 Index futures slid 0.2 percent to 1,703.5.
The advance yesterday ended four sessions of losses spurred by investor concern that a rally since March had overtaken the outlook for economic growth. Since March 9, the S&P 500 has surged 58 percent.
Consumer Concern
Today’s pullback came as the Commerce Department figures also showed that incomes were unchanged in September, while the savings rate climbed. The report showed inflation was lower than the Federal Reserve’s long-term projection, indicating the policy makers can keep rates low.
Billionaire investor George Soros the global economic recovery is “liable to run out of steam” and a “double dip” may follow in 2010 or 2011. He was speaking in Budapest today, in a lecture organized by the Central European University.
The dollar and yen rose against most major currencies on concern central banks around the world may be moving too fast to scale back measures designed to haul their economies out of the recession.
Central banks are signaling they are ready to withdraw stimulus measures even as economic reports show the recovery from the worst global recession since World War II may be tepid.
MetLife Slides
MetLife fell 4.3 percent to $35.25 after posting a third- quarter net loss of $620 million, or 79 cents a share, as revenue declined. Operating earnings, which exclude some investment and derivative results, were 87 cents a share, beating by a penny the average analyst estimate in a survey.
McAfee Inc. declined 4.2 percent to $41.90 after the second-biggest maker of security software reported third-quarter sales that fell short of some analysts’ estimates.
“The beta rally will abate,” said Gunnar Miller, Frankfurt-based global head of equity research at RCM, which oversees $80 billion in assets. “The bounce off the bottom has been almost unprecedented. We’ve already had a pretty good year so we’re expecting things to grind sideways for a while.”
The market for initial public offerings, hurt by the worst returns in at least 14 years, suffered another setback after AEI pulled its sale.
Enron’s Legacy
Enron Corp.’s former international energy business postponed its IPO yesterday, citing “market conditions” after underwriters earlier cut it by 58 percent to 21 million shares and lowered the forecast price range. The expected size of the offering had fallen to under $300 million from $800 million after Ashmore Group Plc, the London-based fund manager that controls the company, withdrew.
Chevron Corp. rose 0.7 percent to $78.50. The second- largest U.S. energy company reported third-quarter profit excluding some items of $1.72, 16 percent higher than the average of analyst estimates compiled by Bloomberg.
Las Vegas Sands Corp. rallied 9.1 percent to $16.10. The casino company run by billionaire Sheldon Adelson said Las Vegas convention business is recovering, after collapsing during the recession.
So far, earnings-per-share have topped estimates at 81 percent of the companies in the S&P 500 that posted third- quarter results, which would be a record proportion for a full quarter, according to Bloomberg data going back to 1993.
Deutsche Bank AG boosted its estimates for economic growth in the second half of 2009 and 2010, citing a “noticeable pickup in demand” following yesterday’s third-quarter report.
Gross domestic product growth estimates were raised to 4 percent in the current quarter, 4.5 percent in the first quarter of 2010, 3.5 percent in the second quarter, 3.7 percent in the third quarter and 3.8 percent in the fourth quarter. The previous forecasts were 2.5 percent, 2.6 percent, 3.1 percent, 3.3 percent and 3.8 percent.
