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

23 July 2012

Long day ahead…thanks in part to Greece (again!).

U.S. stock futures declined, following a two-week advance in the Standard & Poor’s 500 Index, amid concern Europe’s debt crisis is deepening and after a Chinese central-bank adviser said growth may slow further.

Morgan Stanley (MS) and Bank of America Corp. (BAC) dropped at least 2.5 percent, following a tumble in European lenders, as Spanish bond yields surged on expectations regional governments may ask for aid. Freeport-McMoRan (FCX) Copper & Gold Inc. slid 2.5 percent, pacing losses in commodity producers, amid concern about lower Chinese demand.McDonald’s Corp. (MCD), the world’s largest restaurant chain, fell 2.3 percent as profit trailed estimates.

S&P 500 futures expiring in September lost 1.4 percent to 1,339 at 8:49 a.m. New York time. Dow Jones Industrial Average futures slipped 210 points, or 1.6 percent, to 12,563.

“Nothing is really fixed in Europe,” said John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York. His firm oversees $201 billion. “The Spanish situation is chronic. And it’s not just Spain. This isn’t over.”

Stocks joined a global slump before the arrival in Athens tomorrow of Greece’s troika of international creditors — the European Commission, the European Central Bank and theInternational Monetary Fund. In Spain, Catalonia joined a list of regions that may tap aid from the central government. Spain’s 10-year yields surged above 7.5 percent for the first time.

Song Guoqing, an academic member of the People’s Bank of China monetary policy committee, predicted the nation’s expansion may cool to 7.4 percent this quarter. He also warned that a decline in producer prices in tandem with consumer inflation may hurt investment returns of industrial companies.

Corporate Results

Investors also watched corporate results. Sales rose an average 2.9 percent in the second quarter among 119 members of the S&P 500 that have reported results so far, the weakest since the third quarter of 2009, according to data compiled by Bloomberg. Only 42 percent of the reported companies have topped analysts’ estimates on sales, while 73 percent have beaten on profit, the data show.

Financial companies slumped today as a measure of European lenders retreated 3.7 percent. Morgan Stanley dropped 3.6 percent to $12.32. Bank of America sank 2.5 percent to $6.89.

Commodity producers fell and the S&P GSCI gauge of raw materials dropped 3.1 percent. Freeport-McMoRan, the biggest publicly traded copper producer, slipped 2.5 percent to $32.91.

McDonald’s slipped 2.3 percent to $89.50. Chief Executive Officer Don Thompson, who took the helm earlier this month, has struggled to lure budget-conscious Americans with a new extra- value menu. Sales at stores open at least 13 months in the U.S. rose 3.6 percent, the slowest growth in five quarters.

Apple, Facebook

Apple Inc. (AAPL), the world’s largest company by market value, lost 1.6 percent to $594.66. Tomorrow, it will probably report profit grew 35 percent to $9.86 billion, according to the average of analysts’ estimates compiled by Bloomberg. Sales are projected to rise 31 percent to $37.3 billion. While that kind of growth would outpace gains by most of Apple’s technology peers, it would be the company’s slowest since 2009.

Facebook Inc. (FB) this week is getting its first crack as a public company to allay the growth concerns that have made it the second-worst performing U.S. technology initial public offering of 2012. Executives will hold a conference call July 26 to discuss second-quarter results.

Sales probably rose 30 percent to $1.16 billion in the June period, according to analystpredictions compiled by Bloomberg. That would be the slowest growth rate yet disclosed by the company co-founded by Mark Zuckerberg in 2004 in a Harvard University dorm room.

Takeover Deals

RailAmerica Inc. (RA) jumped 9.3 percent to $27.11. Genesee & Wyoming Inc. agreed topurchase the short-line railroad controlled by Fortress Investment Group LLC for $1.39 billion to combine North America’s two largest short-line and regional rail operators.

U.S. shares of Nexen Inc. (NXY) surged 55 percent to $26.35. Cnooc Ltd. agreed to pay $15.1 billion in cash to acquire Calgary-based Nexen in the biggest overseas acquisition by a Chinese company.

Better-than-forecast earnings are masking weaker sales growth in the most recent quarter as U.S. companies including International Business Machines Corp. improve margins to top estimates.

The gap in results signals companies may hold off hiring and expanding until demand rebounds globally. Federal Reserve Chairman Ben S. Bernanke told lawmakers last week that progress in reducing unemployment may be “frustratingly slow” with joblessness stuck above 8 percent since February 2009.

Earnings Estimates

Analysts have lowered predictions for profit and revenue in recent months. For earnings, they estimate a 1.6 percent decline on average among all S&P 500 members after anticipating a 0.5 percent increase in May. Revenue may rise 1.8 percent on average, down from a 3.7 percent estimate in May.

“People are sitting on the sidelines right now waiting to see what happens,” Verizon Communications Inc. Chief Financial Officer Fran Shammo said in a telephone interview last week after the New York-based company reported in-line second-quarter profit and sales. “This isn’t helping with growth, so I think we will continue to mosey along here in the states.”


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