U.S. stock futures advanced after yesterday’s sell-off left companies in the Standard & Poor’s 500 Index valued at the cheapest relative to earnings since 1986, overshadowing concern the economy will deteriorate further. Citigroup Inc. rose 13 percent in early New York trading, while Bank of America Corp. gained 5.1 percent. The S&P 500 traded at 12.2 times company profits from the past 10 years as of yesterday’s close, according to data compiled by Yale University professor Robert Shiller, who uses a decade of earnings to smooth out short-term fluctuations. Futures on the S&P 500 expiring this month added 0.5 percent to 709.20 as of 12:22 p.m. in London after the index closed at the lowest level since October 1996. Dow Jones Industrial Average futures gained 0.5 percent to 6,826 and Nasdaq-100 Index futures advanced 0.6 percent to 1,092.50. “Everything is a buying opportunity because valuations are super attractive,” said Jacques Porta, a fund manager at Ofi Patrimoine in Paris, which oversees about $615 million. “We’ve never seen anything like it. But the problem is there is still the risk of declines. We’re still in a credit crunch and the outlook on the economy is negative.” Europe’s Dow Jones Stoxx 600 Index declined as much as 1.4 percent to 162.02, the lowest level since 1996, on concern profits are deteriorating and banks will need more capital. Most Asian shares declined. Biggest Loss The Dow average dropped below 7,000 for the first time since 1997 yesterday after Warren Buffett said the economy is in “shambles” and American International Group Inc. posted the largest corporate loss in U.S. history. The deepening global recession, a third government rescue for Citigroup and dividend cuts at companies from General Electric Co. to JPMorgan Chase & Co. have dragged the S&P 500 to three consecutive weeks of declines, pushing the index down 22 percent this year. The S&P 500 is “oversold” and will rally from a 12-year low if its relative strength index is any indication, Michael O’Rourke, chief market strategist at New York-based BTIG LLC said. The S&P 500’s 14-day relative strength index, or RSI, fell to 27.47 yesterday, below the level of 30 that some traders use as a trigger to buy. Citigroup, the recipient of three U.S. government bailouts, advanced 13 percent to $1.35. Bank of America, the largest U.S. bank by assets, increased 5.2 percent to $3.82. Credit Losses President Barack Obama’s administration may create investment funds to purchase loans and other distressed assets, the Wall Street Journal reported, citing people familiar with the matter. Managers of the funds would have to invest some of their own capital, along with government money, and would share in any profit or loss, the report said. No decision has been made on the final structure of this financing partnership, it said. The S&P 500 has dropped 52 percent since the start of 2008 as credit-related losses at financial firms worldwide reached $1.1 trillion and Europe, the U.S. and Japan fell into the first simultaneous recessions since World War II. Exxon Mobil Corp., the world’s biggest oil producer, rose 1.3 percent to $65.73 in German trading. Crude rebounded as much as 2.2 percent to $41.05 a barrel in New York after dropping 10 percent yesterday. Genzyme Corp. retreated 5.5 percent to $53.41 in Germany after the maker of treatments for rare genetic disorders said it failed to win approval for a version of its drug for Pompe disease made in larger batches. Citigroup cut its recommendation on the shares to “hold” from “buy.” Economy Watch MBIA Inc., the bond insurer that split its guarantee business in two, posted a fourth-quarter net loss of $1.16 billion amid mortgage-bond costs. The shares added 1.6 percent to $2.54 in German trading. Fewer Americans signed contracts to buy previously owned homes in January, signaling the housing slump will extend well into a fourth year, economists said before a private report at 10 a.m. in Washington. The index of pending home resales fell 3.5 percent after a 6.3 percent gain in December, according to the median forecast in a Bloomberg News survey of 32 economists.

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