In the U.S.: U.S. Stock Futures Gain After Alcoa Posts Surprise Profit

11 April 2012


Stocks rebound on news that “biggest U.S. aluminum maker” beat “analysts’ estimates for earnings.”

U.S. stock futures advanced, indicating the Standard & Poor’s 500 Index will rebound from its lowest level in a month, as Alcoa Inc. (AA) posted a surprise first- quarter profit, unofficially kicking off the earnings season.

Alcoa, the biggest U.S. aluminum maker, climbed 5.5 percent in early New York trading after beating analysts’ estimates for earnings per share as orders rose and it closed higher-cost smelting capacity. U.S. lenders climbed with JPMorgan Chase & Co. and Bank of America Corp. (BAC) advancing at least 1.5 percent.

S&P 500 (SPM2) futures expiring in June added 0.8 percent to 1,368.2 at 7:33 a.m. in New York. Futures on the Dow Jones Industrial Average expiring the same month gained 90 points, or 0.7 percent, to 12,770.

“Stocks have been ruled by macro indicators for a long time, but we’re going to see company performance play a bigger role as valuations are now aligned with expectations,” said Hans Peterson, the chief investment officer of SEB Private Bank in Stockholm. “Revenue growth and margins will call this earnings season as they’ll show if the business cycle is still weak, as some investors fear, despite indicators having improved lately.”

The S&P 500 fell 1.7 percent yesterday, the gauge’s biggest drop since Dec. 8, slipping for a fifth straight day as a surge in Spanish and Italian bond yields fueled concern that the euro area’s debt crisis is worsening. Following the best start to a year since 1998, the S&P 500 hasdropped 3.5 percent in April as minutes from the March meeting of the Federal Open Market Committee showed a decreased urgency for further monetary stimulus.

Spain Pursues Cuts

Spain’s Prime Minister, Mariano Rajoy, addresses the lawmakers of his People’s Party today to explain the country’s deepest budget cuts in more than three decades.

Spain’s 10-year borrowing costs jumped more than one percentage point since March 2, when Rajoy announced that the country will miss its 2012 budget-deficit goal approved by the European Union. Euro-area finance ministers on March 12 agreed that Spain could narrow its targeted shortfall to 5.3 percent of gross domestic product from 8.5 percent last year.

Beige Book

The Fed will release its Beige Book regional business survey today. The central bank said in its last report on the local economic climate surveyed by the nine branches of the Fed that the U.S. economy expanded at a “modest to moderate pace” in January and early February as factories increased production.

U.S. manufacturing continued to expand in March, a release showed on April 2. A Labor Department report on April 6 revealed that employers in the U.S. added fewer jobs in March than forecast, underscoring Fed Chairman Ben S. Bernanke’s concern that recent gains in employment may not be sustained without a pickup in growth.

Alcoa rallied 5.5 percent to $9.83 in New York. The aluminum producer announced an unexpected profit after U.S. trading closed yesterday. Net income fell 69 percent to $94 million, or 9 cents a share, from $308 million, or 27 cents, a year earlier, New York-based Alcoa said in a statement. The company posted profit excluding restructuring costs and other items of 10 cents a share, compared with the average of 19 analysts’ estimates compiled by Bloomberg for a 4-cent loss. Sales rose to $6.01 billion from $5.96 billion, beating the $5.77 billion average of 12 estimates.

The earnings were “driven by higher-than-expected profitability from every operating segment,” Brian Yu, an analyst at Citigroup Inc. in San Francisco who estimated a 6- cent loss, said in a note. “Good cost control likely played a major role.”

JPMorgan (JPM) and Bank of America, the two biggest U.S. lenders by assets, added 1.5 percent to $43.59 and 2.5 percent to $8.75, respectively, in early New York trading. Banks contributed the most to the Stoxx Europe 600 Index (SXXP)’s rally today.

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