In the U.S.: U.S. Stock Futures Little Changed Ahead Of Economic Data

26 June 2012


Will there be much/any profit to take at the end of this quarter? Investors face a “lack of direction.”

U.S. stock futures were little changed, after yesterday’s selloff in global equities, as investors awaited reports on housing and consumer confidence.

News Corp. (NWSA) rallied 5.9 percent as Rupert Murdoch is said to consider splitting his media company into two. Seagate Technology Plc (STX) climbed 3.5 percent as the largest maker of computer disk drives will replace Progress Energy Inc. in the Standard & Poor’s 500 Index. JPMorgan Chase & Co. (JPM) gained 1.2 percent after being raised at Goldman Sachs Group Inc.

S&P 500 futures expiring in September added 0.1 percent to 1,307.50 at 8:24 a.m. New Yorktime. Dow Jones Industrial Average futures rose 10 points, or 0.1 percent, to 12,441.

The S&P/Case-Shiller index of property values in 20 U.S. cities fell 2.5 percent in April from a year earlier after a 2.6 percent drop the previous month, according to a Bloomberg survey. The Conference Board’s consumer-confidence index dropped to 63 this month from 64.9 in May, economists predict.

Stocks tumbled yesterday on concern this week’s European Union summit will fail to tame a crisis which put American earnings on pace for the first decline since 2009. Analysts predict members of the S&P 500 (SPX) will report a 1.1 percent average drop in second-quarter earnings, after estimating a gain as recently as last month, according to data compiled by Bloomberg.

News Corp. rallied 5.9 percent to $21.26. The potential split of the company comes as U.K. regulator Ofcom considers whether News Corp. should be allowed to keep its 39 percent stake in British Sky Broadcasting Group Plc. (BSY) A phone-hacking scandal at the U.K. newspapers thwarted News Corp.’s plans to take full control of Britain’s biggest pay-TV operator, which was led by Rupert’s son James for almost a decade.

Seagate Technology

Seagate Technology added 3.5 percent to $24.08. The replacement will occur on June 29.

JPMorgan rose 1.2 percent to $35.73. Goldman raised its recommendation to Conviction Buy and cut Morgan Stanley (MS) to neutral. The shares lost 1.1 percent to $13.33.

Apollo Group Inc. (APOL) jumped 3.4 percent to $33.58. The largest U.S. for-profit college chain lifted its full-year forecast for operating earnings and posted better-than-estimated profit.

The S&P 500, down 7.4 percent since reaching a four-year high in April on weakening economic data, is about to lose another pillar of support: the election year calendar.

America’s benchmark gauge for equities has climbed an average of 0.1 percent in third quarters before a presidential vote in election cycles since 1945, the worst return of the year and down from an average increase of 2.2 percent between April and June, according to S&P. U.S. shares have returned 5.7 percent in election years since World War II, the second-worst performance during four-year executive branch terms.

Economic Concern

Stocks have retreated following a rally in the first quarter, dragged down after reports on U.S. manufacturing and employment trailed economist forecasts and concern grew that Europe’s debt crisis will spur a global recession. The S&P 500 dropped 8.9 percent in the July-September quarter of 2008 as the financial crisis intensified. It has rebounded 1.9 percent on average in quarters after elections, S&P’s data show.

“This lack of direction is understandable, in our opinion, as investors are bombarded by the hype from the conventions, speeches and political advertisements, as they await the outcome of the upcoming election,” Sam Stovall, S&P’s chief equity strategist, wrote in a note yesterday. “Once the election is over, however, so is the uncertainty.”

While the index posts an average gain during the third quarter of election years, it’s just as likely to rise as fall, according to S&P. Its lowest point during years of presidential votes have come in the first half 71 percent of the time, the data shows. The most consistent gains come in the final quarter, when the gauge has climbed 81 percent of the time.

Only twice out of the 17 election years since 1944 did the index bottom in the fourth quarter, in 2000 and 2008, when the market suffered the bursting of Internet and housing bubbles, respectively. President Barack Obama, a Democrat, is seeking a second term against Republican candidate Mitt Romney on Nov. 6.

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