BLBG: U.S. Stock Futures Decline Amid Greece Concern
U.S. stock futures fell, indicating the Standard & Poor’s 500 Index will decline for a third day, amid concern about Europe’s debt crisis as Greece signaled opposition to economic oversight in exchange for aid.
Bank of America Corp. decreased 2.1 percent after Goldman Sachs Group Inc. reduced its recommendation for the Charlotte, North, Carolina-based lender. Alcoa Inc. (AA) and Mosaic Co. (MOS) declined more than 1.4 percent as commodities prices retreated.
S&P 500 futures expiring in March fell 0.8 percent to 1,301.50 at 8:38 a.m. New York time. Dow Jones Industrial Average futures slid 92 points, or 0.7 percent, to 12,522.
“The question isn’t whether or not Europe goes into a recession, but how deep that recession is going to be,” Tom Wirth, who helps manage $1.5 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a telephone interview. “Greece as it stands currently is untenable. The market is getting comfortable with some sort of Greek default, whether it’s orderly or disorderly.”
The S&P 500 rose for four straight weeks as the U.S. Federal Reserve plans to keep interest rates low through at least late 2014 and better-than-estimated earnings offset slower-than-forecast economic growth. Of the 169 S&P 500 companies that reported results since Jan. 9, 112 posted per- share earnings that beat projections, Bloomberg data show.
European policy makers discuss plans to directly intervene in Greek budget decisions as the country struggles to cut its deficit, two euro-region government officials said Jan. 28. Greek Finance Minister Evangelos Venizelos yesterday rejected reports of plans to appoint a commissioner, citing “national dignity.” U.S. consumer spending stalled in December.
Banks Decline
American banks fell as a gauge of European lenders retreated 2.7 percent. Bank of America declined 2.1 percent to $7.14 after Goldman Sachs cut its recommendation for the shares to “neutral” from “buy.”
Raw material shares retreated as the S&P GSCI Index of commodities fell 0.5 percent. Alcoa, the largest U.S. aluminum producer, dropped 1.4 percent to $10.28. Mosaic, the world’s largest phosphate-fertilizer producer, slid 1.8 percent to $55.57.
Valuations (SPX) for U.S. equities have been stuck below the five-decade average for the longest period since Richard Nixon’s presidency, a sign investors don’t trust earnings even after a three-year bull market. Analysts estimate profits in the S&P 500 will reach a record $104.78 this year after increasing 125 percent since the end of 2009, the fastest expansion in a quarter century, according to data compiled by Bloomberg.
Boosting Income
American companies are boosting income so much that even after stocks doubled, the S&P 500 hasn’t traded above its 16.4 mean ratio for 446 days, the longest stretch since the 13 years beginning in 1973.
Battered by the 14 percent decline in the S&P 500 since 2000, the worst financial crisis since the Great Depression and the so-called flash crash 21 months ago, investors are staying away from stocks, even after record profits, 10 quarters of U.S. economic growth and promises by the Federal Reserve to keep interest rates near zero through 2014. Of the $37 trillion erased from global equities in the credit crisis, $24 trillion has been restored.
“After two significant bear markets, the flash crash and the lost decade, many have simply said, ‘No mas,’” Howard Ward, who helps oversee $35 billion at Gamco Investors Inc. in Rye, New York, said in an e-mail on Jan. 24. “Of course, bull markets have a history of climbing a wall of worry. And it is happening again.”
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
