U.S. stock-index futures dropped, indicating the Standard & Poor’s 500 Index may extend its fourth straight weekly retreat, amid growing concern the economic slowdown may be prolonged.
CIT Group Inc., the century-old lender that is trading in the bond market as if it may fail, tumbled 18 percent on concern the Federal Deposit Insurance Corp. won’t guarantee the company’s bond sales. Chevron Corp. slid 2.3 percent as crude headed for its biggest weekly decline since January. International Business Machines Corp. slipped 1.2 percent in as Goldman Sachs Group Inc. downgraded the shares to “neutral.”
S&P 500 futures expiring in September lost 0.8 percent to 872 at 8:30 a.m. in New York. Dow Jones Industrial Average futures dropped 0.8 percent to 8,072 and Nasdaq-100 Index futures decreased 0.5 percent to 1,406.
U.S. stocks rose yesterday as an analyst upgrade of Goldman Sachs spurred a rally in financial shares and a rebound in natural-gas prices lifted energy producers. The S&P 500 has still dropped 6.7 percent since June 12 on concern the rebound of as much as 40 percent from a 12-year low in March outpaced prospects for a recovery in the economy.
“The week has been very mixed as economic concern determined the volatile market environment,” said Michael Kastler, an equity analyst at Schoellerbank AG in Salzburg, Austria, which oversees about $4.4 billion. “Economic data is the foundation for market activity. We are concerned about the debt problem, high unemployment, the further weakening of the economy and its effects on corporate earnings.”
Recession
The worst recession in half a century may be prolonged because consumers see few signs that job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.
The U.S. needs another stimulus package because President Barack Obama’s initial $787 billion plan hasn’t been implemented fast enough, according to Shiller. Roubini, an economics professor at New York University, said the recession will likely continue for six months as companies struggle to pay their creditors.
The economy shrank 5.5 percent in the first quarter and 6.3 percent in the fourth quarter of 2008, the worst six months since 1958, according to data compiled by Bloomberg.
Analysts estimate profits of S&P 500 companies fell 34 percent last quarter from a year earlier after plunging 33 percent in the first quarter, Bloomberg data show. They forecast a 21 percent year-on-year drop in the third quarter.
Chevron
Chevron declined 2.3 percent to $61.65. The second-biggest U.S. energy producer said the falling dollar slashed overseas profit from oil and natural-gas wells by almost $7 million a day during April and May, more than double the impact of currency fluctuations during the second quarter of 2008.
Crude oil fell, headed for its biggest weekly decline since January, on concern a prolonged global recession will sap demand for energy.
Caterpillar, the largest maker of bulldozers and excavators, declined 1.1 percent to $30.32.
CIT Group Inc. tumbled 18 percent to $1.52. The Federal Deposit Insurance Corp. is unwilling to guarantee the company’s bond sales because the commercial lender’s credit quality is worsening, according to people familiar with the regulator’s thinking.
Confidence
The decline in stocks and rising unemployment may stem recent gains in consumer confidence. The preliminary Reuters/University of Michigan consumer sentiment gauge, due at 10 a.m., may drop to 70 this month from a 16-month high of 70.8 in June, according to economists. It would mark the first decrease in five months.
The U.S. economy will expand faster than previously forecast in the second half of this year and in 2010 as a revival in consumer spending signals an end to the recession, a Bloomberg News survey showed.
Growth will average 1.5 percent in the July-to-December period, compared with last month’s 1.2 percent projection, according to the median of 57 forecasts in the survey taken from July 2 to July 8. The jobless rate will exceed 10 percent early next year and average 9.8 percent for 2010.
IBM fell 1.2 percent to $100.89 in New York. The world’s biggest computer-services provider was downgraded to “neutral” from “buy” at Goldman Sachs, which said investors will “shift their focus from earnings resiliency in a period of soft demand to companies with greater operating leverage and higher top-line growth as tech spending improves.”
Dell Inc. rose 2.4 percent to $13.47. Goldman Sachs upgraded the world’s second-biggest maker of personal computers to “conviction buy” from “neutral.”
SOURCE: Bloomberg
