In the U.S.: U.S. Stock-Index Futures Fall After Last Week’s Rally

17 September 2012


“You have to wonder if markets have not got slightly ahead of themselves…” A good time to be cautious I’d say.

U.S. stock-index futures fell, after the benchmark Standard & Poor’s 500 Index rallied last week to its highest level since 2007, as manufacturing in the New York region contracted more than forecast in September.

Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) slid more than 0.9 percent after two weeks of gains. Wells Fargo & Co. (WFC) fell 0.9 percent after being downgraded at Stifel Nicolaus & Co. Cliffs Natural Resources Inc. (CLF) lost 2.9 percent after its rating was cut by JPMorgan Chase & Co. Office Depot Inc. (ODP) rose 8.9 percent after Starboard Value LP took a stake in the company.

S&P 500 futures expiring in December slid 0.2 percent to 1,456.30 at 8:45 a.m. in New York. The benchmark equities gauge last week rallied to the highest level since December 2007 as the Federal Reserve’s plan to buy mortgage securities fueled demand for riskier assets. Dow Jones Industrial Average futures lost 22 points, or 0.2 percent, to 13,496 today.

“You have to wonder if markets have not got slightly ahead of themselves given the underlying fundamental news does not seem to be getting much better,” said Lex Van Dam, who manages $500 million at Hampstead Capital LLC in London. “It is a bit of a light newsday today with low volumes and most of the short squeeze behind us. To buy the market at this level seems the wrong risk-reward to me.”

Commodity, financial and industrial shares had the biggest gains among 10 groups in the S&P 500 (SPXL1) last week, helping to extend the gauge’s two-week advance to 4.2 percent. The index is 6.8 percent away from its all-time high set in October 2007.

Chinese Growth

Stocks fell from a 15-month high in Europe today before leaders meet this week to discuss the region’s debt crisis and as Citigroup Inc. became the latest bank to cut its growth forecast for China. At least 13 banks and brokerages have reduced their 2012 economic growth forecasts for the world’s second-largest economy this month.

U.S. equity futures also fell as the Federal Reserve Bank of New York’s general economic index dropped to minus 10.41, the lowest since April 2009, from minus 5.85 in August. The median forecast of 53 economists in a Bloomberg survey called for minus 2. Readings less than zero signal contraction in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.

Financial companies declined. Wells Fargo lost 0.9 percent to $35.80 after Stifel Nicolaus cut the fourth-largest U.S. bank by assets to hold from buy. Bank of America, which has climbed 20 percent in the past two weeks, lost 1 percent to $9.45, while JPMorgan fell 0.9 percent to $41.21 and Morgan Stanley (MS) declined 1.1 percent to $18.04.

Alcoa Slips

Alcoa Inc., the largest U.S. aluminum producer, slid 0.8 percent to $9.76. Copper led metals lower in London amid speculation last week’s 5.1 percent rally was overdone given rising stockpiles in warehouses monitored by the London Metal Exchange, the Comex and Shanghai Futures Exchange.

Cliffs Natural Resources slipped 2.9 percent to $44.25 after JPMorgan downgraded the stock to neutral from overweight.

Office Depot rose 8.9 percent to $2.69. Starboard Value, a New York-based investment firm, took a 13.3 percent stake in the company, becoming its largest shareholder, and said the retailer must improve its financial results.

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