BLBG: U.S. Stock Futures Decline Amid Earnings Ahead of Data
U.S. stock-index futures fell, after benchmark indexes climbed to five-year highs last week, as investors weighed corporate earnings and awaited a report on existing home sales.
Johnson & Johnson, the world’s biggest maker of health-care products, dropped 0.7 percent after providing a full-year forecast that was less than analysts estimated. Verizon Communications Inc. lost 1.9 percent as it reported a decline in adjusted earnings. Boeing Co. slipped 1.2 percent after halting deliveries of its grounded 787 Dreamliner until regulators say its batteries are safe. DuPont Co. (DD) advanced 1.5 percent as fourth-quarter profit beat estimates.
Futures on the Standard & Poor’s 500 Index expiring in March fell 0.1 percent to 1,477.20 at 8:22 a.m. in New York. Contracts on the Dow Jones Industrial Average declined 17 points, or 0.1 percent, to 13,559 today. U.S. markets were closed yesterday for a holiday.
“People have rather low expectations for U.S. earnings because corporate leaders were very moderate in outlook, and that’s good for the reality versus the guidance,” Didier Duret, who helps manage about $195 billion as chief investment officer at ABN Amro Private Banking in Amsterdam, said by phone. “Even moderate earnings from the U.S. will be fine. The trigger point for markets will be economic reports, including home sales.”
The S&P 500 surged to the highest level since December 2007 last week as companies including General Electric Co. and Goldman Sachs Group Inc. reported better-than-estimated earnings. Some 73 percent of the 73 companies in the benchmark index that have released results so far exceeded projections, according to data compiled by Bloomberg. Analysts on average forecast growth of 3.8 percent in fourth-quarter profit, the data show.
17 Companies
Johnson & Johnson and Freeport-McMoRan Copper & Gold Inc. are among 17 companies in the S&P 500 that are reporting quarterly earnings today.
A report at 10 a.m. in Washington may show existing home sales rose. Purchases climbed to a 5.1 million annual rate last month, from 5.04 million in November, according to the median forecast of economists surveyed by Bloomberg.
In Asia, the Bank of Japan made its strongest commitment yet to end two decades of stagnation, shifting to Federal Reserve-style open-ended asset purchases.
Governor Masaaki Shirakawa and six of nine board members voted for a 2 percent inflation target, to be achieved “at the earliest possible time” -- a pace not sustained in Japan since the early 1990s. While judging that the economy is “relatively weak,” and that consumer prices will be flat for the time being, the BOJ refrained from adding immediate stimulus. consumer items declined. The company’s shares fell.
Missed Guidance
Johnson & Johnson slumped 0.7 percent to $72.70. Profit for 2013 will be $5.35 to $5.45 a share, the company said in a statement. The guidance missed the $5.49 average of 23 analyst estimates compiled by Bloomberg. Worldwide consumer sales declined in 2012 to $14.4 billion, a 2.9 percent decrease caused by a negative currency impact.
Verizon (VZ) retreated 1.9 percent to $41.75 after the second- largest U.S. phone company said fourth-quarter earnings excluding some items fell to 38 cents a share from 52 cents a year earlier. That missed the 50 cent average estimate of analysts in a Bloomberg survey.
Suspend Deliveries
Boeing fell 1.2 percent to $74.16 after saying it will suspend deliveries of 787s while working to meet a U.S. Federal Aviation Administration directive to ensure the plane’s lithium- ion batteries are safe.
Caterpillar Inc. slid 1.7 percent to $96 after the world’s largest maker of construction and mining equipment said it will take a $580 million writedown, reducing fourth-quarter earnings by about 87 cents a share. Accounting “misconduct” at Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., a Chinese company it acquired last year, resulted in the non-cash charge, Caterpillar said after the close of trading on Jan. 18.
DuPont gained 1.5 percent to $47.70. The biggest U.S. chemical company by market value said fourth-quarter net income fell to $111 million, or 12 cents a share, from $373 million, or 40 cents, a year earlier. Profit excluding one-time items was 11 cents a share, beating the 7-cent average of 10 estimates compiled by Bloomberg.
Travelers Cos., the only insurer in the Dow Jones Industrial Average, rallied 2.9 percent to $78.50 as profit beat estimates and the insurer said it was charging policyholders more for coverage. Travelers’ fourth-quarter profit fell 51 percent as superstorm Sandy boosted claims costs.
Copper Sales
Freeport-McMoRan added 1.3 percent to $34.09 after reporting fourth-quarter earnings that beat analysts’ estimates as copper sales rose more expected. The Phoenix-based mining company agreed last month to buy two energy companies for $9 billion.
International investors are the most bullish on stocks in at least 3 1/2 years, with close to two-thirds planning to raise their holdings of equities during the next six months, according to a Bloomberg survey.
As the global financial and business elite gather in Davos, Switzerland, for their annual forum, 53 percent of respondents to the Bloomberg Global Poll also say equities will offer the highest return in the next year. That’s a 17 percentage point jump from the last poll in November and the most since the quarterly survey of investors, analysts and traders who subscribe to Bloomberg began in July 2009.
With 72 percent of corporate earnings exceeding analysts’ estimates, it may be difficult for U.S. stocks not to reach a record in 2013.
2007 High
The S&P 500 is 5.1 percent below the all-time high in October 2007. Profits in the benchmark gauge are forecast to exceed $1 trillion this year, or 31 percent more than when the gauge peaked, according to more than 11,000 analyst estimates compiled by Bloomberg. Even if the price-earnings ratio, now 9.8 percent below the six-decade mean, doesn’t expand, the S&P 500 is poised to recover fully from the financial crisis that began almost six years ago.
“Corporate America has done an incredible job post- recession,” Leo Grohowski, BNY Mellon Wealth Management’s New York-based chief investment officer said in a Jan. 16 phone interview. His firm oversees $179 billion. “It’s not going to be a return to the ’80s and ’90s where we had people retiring from their day jobs to become day traders. I wouldn’t revert to the historic P/E ratio kind of environment. But the good news is I don’t think we need that to reach a record.”
To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net
To contact the editors responsible for this story: Andrew Rummer at arummer@bloomberg.net; Lynn Thomasson at lthomasson@bloomberg.net
