In the U.S.: Stock Futures Fall Amid Disappointing China Report

13 April 2012

Momentum not maintained going into the weekend amidst “slower Chinese demand.”

U.S. stock futures fell, following the best two-day gain for the Standard & Poor’s 500 Index in 2012, as China reported slower-than-expected economic growth.

Freeport-McMoRan Copper & Gold Inc. lost 1.2 percent amid concern that Chinese demand for commodities will drop. JPMorgan (JPM) Chase & Co. and Wells Fargo & Co. (WFC) slid at least 0.8 percent even after earnings topped analysts’ estimates. Google Inc. (GOOG), the world’s largest Internet-search company, rose 0.6 percent as it plans a new stock structure and after profit beat forecasts.

S&P 500 (SPX) futures expiring in June decreased 0.5 percent to 1,379.70 at 8:21 a.m. New York time. Dow Jones Industrial Average futures retreated 57 points, or 0.4 percent, to 12,893.

Equity futures fell as China said gross domestic product rose 8.1 percent in the first quarter, less than the 8.4 percent growth predicted in a Bloomberg survey. A report may show U.S. consumer prices rose 0.3 percent last month after climbing 0.4 percent in February, according to the median estimate in a Bloomberg survey of economists. The Thomson Reuters/University of Michigan’s preliminary index of consumer sentiment probably held at 76.2 in April, projections show.

Some of the largest commodity producers fell on concern of slower Chinese demand. Freeport (FCX) declined 1.2 percent to $37.45. Alcoa Inc. (AA) lost 0.7 percent to $10.10.

Today, investors get a first look at bank results as JPMorgan and Wells Fargo reported earnings. While S&P 500 per- share profit growth slowed to 0.8 percent during the first three months of the year from 4.9 percent in the fourth quarter, it will accelerate to 8.3 percent during all of 2012, according to analyst estimates compiled by Bloomberg.

JPMorgan Falls

JPMorgan lost 0.8 percent to $44.48, reversing earlier gains. It reported a 3.1 percent drop in earnings, a smaller decline than analysts estimated as mortgage revenue surged and trading almost doubled from the fourth quarter. Revenue at the investment-banking unit didn’t match last year’s near-record $8.23 billion, falling 11 percent to $7.32 billion.

Wells Fargo lost 1.8 percent to $33.40. The largest U.S. home lender reported a 13 percent rise in first-quarter profit, setting a record as the bank made more money on new mortgages and curbed losses from old ones.

Google added 0.6 percent to $654.80. The world’s largest Internet-search company plans a new stock structure that gives management more leeway in issuing shares, while letting it keep control over the direction of the business.

The stock change would create a new class of nonvoting shares that will be distributed to existing shareholders in what is effectively a 2-for-1 stock split. Google announced the move as part of its first-quarter financial results, which met or beat most analysts’ estimates, boosted by online-ad spending.

Movie Rental

Coinstar Inc. (CSTR) surged 13 percent to $69.51. The owner of the Redbox movie-rental kiosks said first-quarter sales and profit exceeded its previous projection and lifted its earnings forecast for 2012 to at least $4.40 a share from a previous prediction of no more than $4.30, exceeding the average analyst estimate of $4.15.

Dow Chemical Co. (DOW) advanced 1.5 percent to $33.15. The largest U.S. chemicals producer increased its quarterly dividend to 32 cents a share from 25 cents.

Concern about the global financial system’s stability has grown so much during the past two weeks that investors ought to take less risk, according to Bank of America Corp.’s Merrill Lynch unit.

‘Risk Off’

Forty market-related gauges go into the Bank of America indicator, and 10 of them surged far enough to send a so-called critical stress signal three days ago. The “risk-off” warning was the first since July 12, just before a second-half retreat in stocks got under way.

“We recommend caution,” Benjamin Bowler, head of global derivatives research, and two colleagues wrote in a report two days ago. The MSCI All-Country World Index declined by an average of 3.8 percent in periods when the signal was in place since 2000, the report said.

The stress index’s components reflects the potential worsening of a euro-region debt crisis, according to Bowler, based in San Francisco, and Anders Armelius and Abhinandan Deb, his London-based colleagues.

Credit-default swap rates for government borrowers are showing the most stress, according to their data. A CDS-based based indicator was at 4.1 three days ago. Readings above zero show stress is higher than normal.


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