In the U.S.: Stock Futures Pare Gains After Disappointing Data

31 May 2012

Disappointing job numbers weigh down markets but “slide may…mark a bottom for the market.”

U.S. stock futures pared gains, with the Standard & Poor’s 500 Index poised for the biggest monthly drop since September, as data showed jobless claims increased and the economy grew more slowly than previously estimated.

Talbots Inc. (TLB) doubled after the retailer agreed to be acquired by Sycamore Partners for $369 million including debt. Target Corp. (TGT) gained 0.5 percent after same-store sales beat estimates. Facebook Inc. (FB) rose 0.7 percent, following a 26 percent decline since the company went public this month. TiVo Inc. (TIVO) retreated 3.3 percent after the digital video recorder pioneer reported a first-quarter loss.

S&P 500 futures expiring in June gained 0.2 percent to 1,310.7 at 8:54 a.m. New York time, after rising as much as 0.6 percent earlier today. Dow Jones Industrial Average futures added 22 points, or 0.2 percent, to 12,403 today.

Equity futures were little changed after data showed gross domestic product climbed at a 1.9 percent annual rate from January through March, down from a 2.2 percent prior estimate. The number of Americans applying for unemployment insurance payments rose last week to a one-month high. Companies in the U.S. added 133,000 workers in May, according to ADP Employer Services. The median forecast of economists surveyed by Bloomberg News called for a 150,000 advance.

“Bottom line, as also seen in the ADP report, the labor market is no better than just OK,” Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, wrote in a note.

Investors also watched the latest developments in Europe’s attempts to tame its crisis. Spanish and Italian bonds gained as polls suggested Irish voters will back Europe’s fiscal treaty.

Europe’s Crisis

Concern about Europe’s debt crisis drove the S&P 500 (SPX) down 6.1 percent so far in May. Financial, commodity and technology companies have fallen at least 7.2 percent in the period. The gauge is on pace for a second straight monthly decline, following the best first-quarter gain since 1998.

Talbots climbed 100 percent to $2.58. Shareholders will get $2.75 per share, the Hingham, Massachusetts-based retailer said today in a statement. That’s lower than the most recent offer of $3.05 per share.

Target rose 0.5 percent to $58.09. The second-largest U.S. discount retailer reported a 4.4 percent increase in May same- store sales, beating the estimate for a 3.3 percent gain.

Facebook, which this week fell below $30 for the first time, added 0.7 percent to $28.40. The company was rated buy in new coverage at Topeka Capital Markets Inc. by equity analyst Victor Anthony. The 12-month share-price estimate is $40.

Fifth Third

Fifth Third Bancorp (FITB) rose 0.9 percent to $13.35. Wells Fargo & Co. raised its recommendation for Ohio’s largest lender.

TiVo lost 3.3 percent to $8.66 as hardware costs rose and the company said legal expenses in the current period would lead to a wider loss than analysts expected.

Kohl’s Corp. (KSS) retreated 3.8 percent to $46.98 after the retailer said May same-store sales decreased 4.2 percent. That compares with the average estimate for a 1.1 percent decline.

The S&P 500 may rebound almost 3 percent in June based on the average size of moves following past May declines of 4 percent or more, Bespoke Investment Group said.

The benchmark gauge has fallen 4 percent or more in May on 15 occasions since 1928, followed by an average June increase of 2.8 percent, according to data compiled by Bespoke. The index rose in June 60 percent of the time following such moves.

The last time the S&P 500 slid more than 4 percent during May of a U.S. presidential election year was in 1984, when it tumbled 5.9 percent before rebounding 1.8 percent in June. This year’s slide may also mark a bottom for the market followed by a June rally, Justin Walters, Bespoke’s co-founder, said in a phone interview yesterday.

‘Going Positive’

“The data certainly leans positive,” Walters said. “Along with the election analysis and the big down Mays, the risk-reward favors the market going positive here.”

The S&P 500 has averaged a gain of 0.51 percent in June following an increase in May, the Bespoke report showed, and the index has risen 0.96 percent in June after May declines. Its performance next month ultimately will be determined by Europe’s handling of the government-debt crisis, according to Walters.


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