In the U.S.: Stock-Index Futures Fall After Jobless Claims Report

26 April 2012

Optimism a bit softer with higher jobless claims…”S&P 500 may lose as much as 10 percent from current levels.”

U.S. stock futures fell, following a two-day rally in the Standard & Poor’s 500 Index, amid higher- than-forecast jobless claims data and as earnings from United Parcel Service Inc. to Exxon Mobil Corp. missed estimates.

UPS (UPS), the largest package-delivery company that is considered a proxy for economic growth, slumped 2.4 percent. Exxon lost 1.2 percent. Dow Chemical Co. (DOW), the largest U.S. chemical company by revenue, dropped 5.3 percent as it reported sales that fell short of forecasts. Aetna Inc. (AET) tumbled 7.6 percent on weaker-than-estimated earnings at the health insurer.

S&P 500 futures expiring in June declined 0.4 percent to 1,382.10 at 8:49 a.m. New York time. The benchmark measure for American equities had advanced 1.7 percent over the previous two days. Dow Jones Industrial Average futures retreated 35 point, or 0.3 percent, to 13,005 today.

Equity futures fell amid signs the labor market is taking time to firm. Jobless claims dropped by 1,000 to 388,000 in the week ended April 21 from a revised 389,000 the prior period that was the highest since early January, Labor Department figures showed today in Washington. The median forecast of 48 economists surveyed by Bloomberg News called for a drop to 375,000.

Stocks rallied yesterday as Apple Inc.’s earnings almost doubled and Federal Reserve Chairman Ben S. Bernanke said he’s prepared to do more to stimulate growth. U.S. companies are beating earnings estimates at the highest rate in two years. Profits have topped forecasts at 80 percent of S&P 500 companies reporting from April 10 through yesterday.

UPS Slumps

UPS slumped 2.4 percent to $77.70. Package volume gains at UPS, an economic bellwether because it carries goods from mobile devices to pharmaceuticals, have slowed in recent quarters as Asian economic growth cools. Average revenue per piece stagnated as the company struggles to raise rates.

Rival FedEx Corp. (FDX), which operates the world’s biggest cargo airline, last month projected a profit range for this quarter whose low end trailed analysts’ estimates as the company pared its global growth forecast.

Exxon Mobil (XOM) declined 1.2 percent to $85.80 after saying net income fell 11 percent as its biggest first-quarter production decline since 2008 countered oil prices above $100 a barrel. Chief Executive Officer Rex Tillerson has been looking for new projects to reverse production declines that reached 8.8 percent during the final three months of 2011, the steepest fall-off since Exxon acquired Mobil Corp. in 1999.

Dow Chemical dropped 5.3 percent to $34.15. Sales dropped to $14.72 billion from $14.73 billion, missing the $15.2 billion average of nine estimates.

Aetna, Akamai

Aetna slumped 7.6 percent to $45.60. The company said it spent 81.5 percent of premiums on member care, up from 79.2 percent a year earlier. It also booked nothing for saving on medical costs in prior quarters, revenue that’s typically boosted insurers in recent years, said Jason Gurda, a Leerink Swann & Co. analyst in New York.

Akamai Technologies Inc. (AKAM) retreated 5.2 percent to 36.75. The company that helps businesses deliver data at faster speeds over the Internet said Chief Executive Officer Paul Sagan will leave by the end of 2013.

Watson Pharmaceuticals Inc. (WPI) rose 7 percent to $74.60. The maker of the generic version of Lipitor cholesterol pills agreed to buy closely held drugmaker Actavis Group hf for 4.25 billion euros ($5.6 billion), expanding its reach in Europe and Asia.

10% Drop

The S&P 500 may lose as much as 10 percent from current levels given the market’s tendency to give back some gains after a “strong” rally, according to Bank of America Corp.’s Mary Ann Bartels.

The benchmark measure of U.S. equities jumped 29 percent between Oct. 3 and April 2, when it closed at 1,419.04. The index has since declined to 1,390.69. Bartels said in an April 24 note that one-third to one-half of the six-month advance could be lost, pushing the index down to 1,250 or 1,300. The report came out before the S&P 500 surged 1.4 percent yesterday.

“We’re in a correction,” Bartels, the New York-based head of technical and market analysis at Bank of America, said in a phone interview yesterday. “We’re starting to get sell signals on our intermediate indicators.”

Industries such as consumer staples, telecommunications and utilities have fallen too much as investors favor more “defensive” industries, Bartels said. Stocks driven by the economy, including materials, energy and industrial shares, have fallen out of favor, pointing to a potential “deeper pullback” for the U.S. equity market, she said.

“The market is still staying away from commodity-sensitive cyclicals,” Bartels said. “As long as that continues, that means the market is more likely to go down.”


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