In the U.S.: U.S. Stock Futures Fall On Concern Greece Will Leave Euro

23 May 2012


Gloomy, risk-off day ahead as Greece and Facebook woes pile up.

U.S. stock futures declined, joining a global equity slump, amid concern that Greece may leave the euro as the region’s leaders meet in Brussels.

Bank of America Corp. and Citigroup Inc. (C) retreated at least 1.6 percent, following losses in European financial companies. Dell Inc. (DELL), the world’s third-largest personal computer maker, tumbled 13 percent as the company forecast revenue that missed estimates. Facebook Inc. (FB) rose 1.5 percent after the social networking site that raised $16 billion in an initial public offering last week plunged 19 percent over the past two days.

Standard & Poor’s 500 Index futures expiring in June retreated 0.8 percent to 1,304.5 at 8:42 a.m. New York time. Dow Jones Industrial Average futures expiring the same month declined 92 points, or 0.7 percent, to 12,385 today.

“Uncertainty surrounding Greece’s membership in the euro and possible contagion into other countries plagued by high deficits just isn’t going away, at least not until Greek elections have taken place on June 17th,” said Markus Huber, head of German sales trading at ETX Capital inLondon.

European leaders are meeting today to discuss the region’s debt crisis. The prospect of Greece leaving the euro increased after parties opposed to the terms of the nation’s second bailout by the European Union and the International Monetary Fund won most of the votes in May 6 elections.

Europe’s banks, sitting on $1.19 trillion of debt to Spain, Portugal, Italy and Ireland, are facing a wave of losses if Greece abandons the euro. While lenders have increased capital buffers, written down Greek bonds and used central-bank loans to help refinance units in southern Europe, they remain vulnerable to the contagion that might follow a withdrawal, investors say.

‘Pandora’s Box’

“A Greek exit would be a Pandora’s box,” said Jacques- Pascal Porta, who helps manage $570 million at Ofi Gestion Privee in Paris, including shares in Deutsche Bank AG and BNP Paribas SA. “It’s a disaster that would leave the door open to other disasters. The euro’s credibility will be weakened, and it would set a precedent: Why couldn’t an exit happen for Spain, for Italy, and even for France?”

Financial companies retreated, following a 2.1 percent slump in a measure of European banks. Bank of America declined 1.6 percent to $6.87. Citigroup fell 1.9 percent to $26.40.

Dell tumbled 13 percent to $13.10. The forecast, paired with a first-quarter sales and earnings miss, pointed to problems endemic to Dell, Steve Felice, Dell’s president, said in a conference call. The sales team focused on individual products instead of packages of hardware and software, he said.

Facebook added 1.5 percent to $31.45. The shares fell below its $38 IPO price on May 21. The offering valued Facebook at 107 times trailing 12-month earnings, more than every S&P 500 member except Amazon.com Inc. and Equity Residential. The slump reinforced concern that the IPO was priced too high.

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