U.S. stock futures fell on concern second-quarter earnings will fail to boost investors’ confidence that the rebound in equities will continue. Treasuries declined and oil reversed an earlier gain to drop for a fifth day.
Discover Financial Services slumped 8 percent as the credit-card company said it’s offering $500 million in shares. Intel Corp., the world’s largest chipmaker, helped lead gains in technology companies after Bank of America Corp. upgraded the shares. Ten-year Treasuries dropped on concern record debt sales will overwhelm demand.
“Investors are anticipating the start of the earnings season,” said Kevin Beadles, managing director at Wedbush Morgan Securities in Los Angeles. “There’s a lot of uncertainty there.”
Standard & Poor’s 500 Index futures expiring in September slid 0.4 percent to 892.3 as of 9:10 a.m. in New York. Dow Jones Industrial Average futures lost 0.3 percent to 8,253 and Nasdaq 100 Index futures decreased 0.2 percent to 1,438.
Alcoa Inc. will kick off the earnings season tomorrow as the first company in the Dow average to report results. Analysts estimate profits at S&P 500 companies fell an average 34 percent in the second quarter and will decrease 21 percent from July through September after plunging about 60 percent in the year’s first three months, according to data compiled by Bloomberg.
The S&P 500 has dropped 5 percent since June 12 on concern the 40 percent, three-month surge in the index outpaced prospects for a recovery in the economy and the longest stretch of declining profits on record. Even though the S&P 500 gained 15 percent in the second quarter for its best rally since 1998, the advance stalled in June, leaving the index up less than 0.1 percent in the month.
Discover Financial Services, the credit-card company that got $1.2 billion from the U.S., plans to sell stock to raise funds for its bank or to buy back some of the government stake. Discover shares slumped 8 percent to $9.66.
Intel Corp. gained 2.2 percent to $16.90. Bank of America Corp. upgraded the stock on expectations the industry will grow faster than anticipated because of improving demand for electronics and shrinking inventory. The industry will expand 21 percent next year, Bank of America said. The firm previously forecast growth of 14 percent.
Bank of America also raised its recommendations for Marvell Technology Group Ltd., LSI Corp. and National Semiconductor Corp. Marvell rose 4.3 percent to $11.89. LSI added 7 percent to $4.87. National Semiconductor advanced 1.9 percent to $12.50.
Ten-year Treasuries fell for a second day as the U.S. prepares for a $35 billion sale of three-year notes today, one of a record four auctions this week. The decline pushed up the yield on the 10-year note, widening the differential with two- year securities to the most in a month. Three-year notes declined before the sale, the second of this week’s auctions.
The government sold 10-year Treasury Inflation Protected Securities yesterday, and will auction 10-year notes tomorrow and 30-year bonds on July 9.
“There’s anxiety over these auctions,” said Peter Jankovskis, who helps manage $1.3 billion at OakBrook Investments in Lisle, Illinois. “In the long run, if you have a problem with the Treasury financing, interest-rates will be moving up. That wouldn’t be good for the housing market or for the prospects of an economic rebound and corporate earnings.”
The U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the first plan was “a bit too small,” said Laura Tyson, an adviser to President Barack Obama.
U.S. stocks rose yesterday, erasing an early slump, as speculation that global credit markets are improving overshadowed a drop in commodity producers.
Investors are paying 14.2 times profits of S&P 500 companies. When the valuation reached 15.5 on June 2, it was the most expensive since October.
SOURCE: Bloomberg
