In the U.S.: U.S. Stock Futures Rise As HP Overshadows Economic Data

24 May 2012

Casting a blind eye on Greece for today? Let’s see how long today’s markets can stay up.

U.S. stock futures rose, indicating the Standard & Poor’s 500 Index will gain for a fourth day, as a rally in Hewlett-Packard Co. overshadowed a report that showed orders for business equipment dropped for a second month.

Hewlett-Packard climbed 8 percent as the personal-computer maker announced plans to slice its workforce by 27,000 and reported quarterly sales and profit that topped estimates. Facebook Inc. (FB) rose 1.3 percent, poised for a second day of gains, after tumbling 19 percent earlier this week. Tiffany & Co. (TIF) dropped 7.7 percent as the world’s second-largest luxury jewelry retailer cut its full-year profit and sales forecasts.

S&P 500 futures expiring in June added 0.4 percent to 1,320.80 at 8:43 a.m. New York time. Dow Jones Industrial Average futures rose 33 points, or 0.3 percent, to 12,499 today.

“There are opportunities in the stock market,” said Bernard Delattre, president of Altimeo Asset Management in Paris. “When everyone is scared, it’s time to go out there. It’s a favorable time when we look at valuations.”

Concern about Europe’s debt crisis drove the S&P 500 down 7.1 percent from a four-year high in April. The benchmark gauge for American equities yesterday traded at 13.32 times reported earnings, below the average since 1954 of 16.4.

Equity futures briefly trimmed gains as data showed bookings for non-military goods excluding aircraft decreased 1.9 percent after falling 2.2 percent in March, the first back-to- back decline in a year. Demand for all durable goods, those meant to last at least three years, rose 0.2 percent, matching the median forecast of economists surveyed by Bloomberg News.

HP Rallies

Hewlett-Packard (HPQ) surged 8 percent to $22.77. Chief Executive Officer Meg Whitman is cutting jobs and streamlining businesses as the company grapples with slower demand for printers, services and data-center equipment, leading to a third-quarter profit forecast that was less than analysts predicted. The 8 percent workforce reduction, taking place through firings and early retirement offers, will generate annual savings of as much as $3.5 billion starting in 2014.

Facebook added 1.3 percent to $32.43, after rallying 3.2 percent yesterday. The social networking company is still trading below its initial public offering price of $38.

Tiffany lost 7.7 percent to $57.05. Chief Executive Officer Michael Kowalski said sales in the Americas region “underperformed, continuing a soft trend that began in the last quarter of 2011.” Sales in the first quarter rose 3 percent to $386 million in the Americas and declined 4 percent in the New York flagship store.

Higher Returns

Stock investors may be able to generate higher returns by moving away from volatility and market value in their strategy, according to researchers at Standard & Poor’s.

They reached this conclusion by comparing annual returns for the new S&P Global Intrinsic Value Index and the firm’s Global Broad Market Index since 2000. The returns averaged 6.9 percent and 2.4 percent a year, respectively, and were based on dividend payments along with price changes.

To compile the intrinsic-value indicator, S&P begins with companies in the broad-market gauge. Any stock that ranks among the highest 30 percent by volatility is excluded. The others are weighted by book value, or assets after subtracting liabilities, and projected earnings, rather than market value.

The omission of the most volatile stocks and the weighting methodology “systematically contribute” to the global index’s better performance, the S&P researchers wrote in their study. The latter resembles the approach that Robert Arnott, founder of Research Affiliates LLC, used to create indexes based on profits, cash flow and other fundamental gauges.

S&P recorded similar results for developed and emerging markets and for half a dozen geographic areas: the U.S., the U.K., Europe, Japan, Asia-Pacific emerging markets, and Asiaexcluding Japan, Australia and New Zealand.


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