In the U.S.: S&P 500 Futures Fall On Federal Reserve Fisher’s Remarks

8 August 2012


“Second-quarter sales have missed analysts’ estimates” as “S&P 500 is in a “make-or-break situation.””

U.S. stock futures fell, indicating equities will snap a three-day gain, on disappointing corporate results and after Federal Reserve Bank of Dallas President Richard Fisher said adequate economic stimulus is in place.

Walt Disney Co. (DIS), the largest entertainment company, slid 1.4 percent as revenue trailed estimates. Priceline.com Inc. (PCLN), the biggest U.S. online travel agency by market value, tumbled 15 percent after forecasting earnings that missed forecasts. McDonald’s Corp. (MCD), the world’s largest restaurant chain, retreated 3.1 percent as sales were unchanged worldwide in July.

Standard & Poor’s 500 Index futures expiring in September dropped 0.3 percent to 1,392.4 at 8:37 a.m. in New York. The S&P 500 gained 2.7 percent in three days. Dow Jones Industrial Average futures slid 58 points, or 0.4 percent, to 13,061. The number of shares changing hands in Stoxx Europe 600 Index’s companies was 26 percent lower than the 30-day average at this time of day, according to data compiled by Bloomberg.

Equity futures dropped as the Fed’s Fisher said global central banks may not have the capacity to undertake additional measures. Stocks rose yesterday as Fed Bank of Boston President Eric Rosengren said the central bank should pursue an “open- ended” easing program of “substantial magnitude.”

Investors also watched corporate results. Almost 60 percent of S&P 500 companies which reported second-quarter sales have missed analysts’ estimates, Bloomberg data showed.

Disney dropped 1.4 percent to $49.12. Sales grew 3.9 percent to $11.1 billion, Burbank, California-based Disney said yesterday in a statement, missing projections of $11.3 billion.

Growth Engine

Priceline tumbled 15 percent to $575.99. Consumers in Europe — one of the main engines of growth for Priceline — put off travel amid an economic crisis there. The company had been boosting sales in the region after the 2005 acquisition of Amsterdam-based Booking.com. Results were also dragged down as the strength of the U.S. dollar eroded the value of overseas receipts, said Chief Executive Officer Jeffery Boyd.

McDonald’s slumped 3.1 percent to $86.28. The company’s U.S. sales decline was the worst performance since January 2010 as Americans pulled back spending amid flagging consumer confidence. The company has tried to lure customers with an extra-value menu in the U.S. that includes items mostly priced between $1 and $2.

Macy’s Inc. (M) rose 3.3 percent to $38.22. The owner of its namesake and Bloomingdale’s department stores reported second- quarter profit that beat estimates, helped by its credit cards.

Express Scripts Holding Co. added 5.9 percent to $59.30. The largest U.S. processor of drug prescriptions raised its annual profit forecast as gross margins improved following its April acquisition of Medco Health Solutions Inc.

‘Make-or-Break’

The S&P 500 is in a “make-or-break situation” that will probably lead to either large gains or losses for the benchmark U.S. stocks gauge, according to technical analysts at UBS AG.

After climbing through the 1,390 level, the S&P 500 may go on to test the highs reached in March and May, Michael Riesner and Marc Mueller in Zurich wrote in a report dated yesterday. A drop below 1,325 would indicate a retreat to the early-June low of 1,266. That would be a 9.7 percent slide from yesterday’s close of 1,401.35.

Investors should watch the flow of money into so-called defensive stocks, whose earnings are less dependent on economic growth, and cyclicals, which are more tied to the performance of the economy, for signs of future moves in the S&P 500 (SPX), the analysts said.

“The U.S. market remains in a classic make-or-break situation, where a breakout and a subsequent trend move shouldn’t be too far away,” they wrote. “Either the market is able to start a new momentum impulse — and for this we would need to see a rotation on the sector basis, from defensives into financials or cyclicals — or the S&P 500 will very soon get a breadth problem, when defensives are starting to pull back.”

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