BLBG: U.S. Stock-Index Futures Slide on Citigroup Rescue, GDP Report
U.S. stock futures declined as the government cut shareholders’ stake in Citigroup Inc. by 74 percent and a report showed the economy shrank at a faster pace than previously estimated.
Citigroup plunged 31 percent, while Bank of America Corp. tumbled 22 percent and JPMorgan Chase & Co. lost more than 6 percent. General Electric Co. and Alcoa Inc. fell more than 5 percent in European trading after the Commerce Department said gross domestic product contracted at a 6.2 percent annual pace in the fourth quarter.
“The bears have the upper hand right now,” said Tom Wirth, senior investment officer at Chemung Canal Trust Co., which manages $1.5 billion in Elmira, New York. “The fear is that this will happen to all the preferreds that the government has given to the banks. In one word, it’s dilution,”
Standard & Poor’s 500 Index futures expiring in March slipped 2.3 percent to 735.1 at 8:49 a.m. in New York. Dow Jones Industrial Average futures fell 1.9 percent to 7,045 and Nasdaq- 100 Index futures decreased 1.7 percent to 1,113.25.
In the past five days, companies from JPMorgan Chase & Co. to Textron Inc. cut their dividend and President Barack Obama proposed reducing payments to health-care companies, pushing the S&P 500 toward a third straight weekly decline. The index has lost 8.9 percent in February amid concern Obama’s stimulus package won’t be able to prevent the recession from deepening.
U.S. stocks yesterday dropped for a second day as concern health-care profits will be hurt by a White House overhaul of the medical system offset a rally in banks spurred by the administration’s request for more financial-rescue funds.
Citigroup Conversion
Citigroup sank 77 cents to $1.69 in early New York trading. The Treasury Department will convert as much as $25 billion of preferred shares into common stock. The government said it will make the swaps only if private holders agree to the same terms. The U.S. doesn’t immediately intend to inject additional money after channeling $45 billion to the New York-based company last year.
Financial companies may fall to 7 percent of the S&P 500 before losses in bank stocks end, extending a drop that already cut the weighting in half, say analysts including Mary Ann Bartels of Bank of America Corp. and John Roque of Natixis Bleichroeder Inc., who base predictions on price charts.
Profits at the 455 companies in the S&P 500 that have reported quarterly earnings since Jan. 12 dropped 35 percent on average, according to Bloomberg data.
