In the U.S.: U.S. Stock Futures Fall Amid Europe’s Debt Crisis Concern

28 August 2012

“Global growth is not self-perpetuating…heavily dependent on continued monetary stimulus.”

U.S. stock futures retreated, indicating the Standard & Poor’s 500 Index will drop for a second day, amid concern about a worsening of Europe’s debt crisis and as Japan pared its assessment of the economy.

S&P 500 (SPX) futures expiring in September declined 0.1 percent to 1,406.70 at 9:15 a.m. New York time. Dow Jones Industrial Average futures slid 10 points, or 0.1 percent, to 13,097. The number of shares changing hands in Stoxx Europe 600 Index’s companies was 32 percent lower than the 30-day average at this time of day, according to data compiled by Bloomberg.

“Global growth is not self-perpetuating, but is instead heavily dependent on continued monetary stimulus,” Robert Bergqvist, chief economist at SEB AB in Stockholm, wrote in a report today. “Since the world economy is unable to take off on its own, central banks are being forced into increasingly drastic stimulus measures. We expect the U.S. Federal Reserve to deliver a new round of quantitative easing this autumn.”

Japan’s government downgraded its assessment of the economy for the first time in 10 months on risks from a further global slowdown. Stocks extended declines after Catalonia said it will request 5 billion euros ($6.3 billion) from Spain’s financing facility for regions.

In the U.S., data showed that home prices in 20 U.S. cities climbed in June from a year earlier. A gauge of U.S. consumer confidence probably rose in August, economists said before data from the Conference Board today. A report tomorrow on U.S. gross domestic product may show faster growth in the world’s largest economy before Federal Reserve Chairman Ben S. Bernanke’s speech on Aug. 31 at an annual meeting in Jackson Hole, Wyoming.

Consumer Stocks

Consumer stocks are worth buying because they lessen the risks associated with lower earnings estimates and any revival in market volatility, according to Gina Martin Adams, a Wells Fargo & Co. strategist. The ratios of two S&P 500 gauges of consumer-related shares to the index have retreated from this year’s highs. Retailers, media companies and others in S&P’s consumer-discretionary category peaked in May. Makers of food, beverages and other consumer staples followed suit in July.

“U.S. consumers have managed to hold their own,” Martin Adams wrote in a report. “Consumer stocks have followed along the path of the consumer, offering stability amid the noise of the broader markets.”

Both industry groups ought to carry more weight with investors than they do within the S&P 500, according to the New York-based strategist. Each was about 11 percent of the index’s value as of yesterday, according to data compiled by Bloomberg.

Fast Pace

Earnings for consumer companies are poised to rise at a relatively fast pace, the report said. She estimated that next year’s profit for the staples category will climb 6.1 percent, the biggest increase among the S&P 500’s 10 broadest industry groups. Consumer-discretionary earnings may rise 4 percent, surpassing a 3.3 percent growth estimate for the 500-stock index, she wrote.

Consumer industries may be a haven from bigger U.S. stock swings, Martin Adams wrote. In the past year, the staples index moved 0.56 percent on average for each 1 percent change in the S&P 500, the report said. The consumer-discretionary gauge matched the S&P 500’s moves, which resulted in a so-called beta of 1. The Chicago Board Options Exchange Volatility Index, or the VIX, advanced 22 percent through yesterday from a five-year low on Aug. 17.


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