BLBG: U.S. Stock Futures Decline as Euro-Area Recession Deepens
U.S. stock futures fell, signaling the Standard & Poor’s 500 Index will retreat from the highest level since October 2007, as economies in the euro area and Japan contracted more than forecast in the fourth quarter.
Cisco Systems Inc., the world’s largest maker of computer- networking gear, lost 1.6 percent after its sales forecast missed analysts’ most optimistic estimates. HJ Heinz Co. surged 21 percent after Warren Buffett’s Berkshire Hathaway Inc. and 3G Capital agreed to buy the company in a deal valued at about $23 billion. US Airways Group Inc. gained 0.6 percent after agreeing to an $11 billion merger with AMR Corp.’s American Airlines.
S&P 500 futures expiring in March declined 0.3 percent to 1,513.2 at 8:11 a.m. in New York. Dow Jones Industrial Average futures dropped 48 points, or 0.3 percent, to 13,910 today.
“The fundamentals aren’t as strong as people had hoped,” said Nick Xanders, an equity strategist at BTIG Ltd. in London. “The market has gone up despite the fact that the numbers haven’t. It is asking a lot to buy the market today on the hopes of an improvement in the second half after what is looking to be a weaker first half.”
Data today showed the recession in the euro area deepened, with the worst performance in almost four years. Gross domestic product in the 17-nation region fell 0.6 percent in the fourth quarter, the European Union’s statistics office in Luxembourg said, a sharper contraction than the 0.4 percent median forecast of economists in a Bloomberg survey.
In Japan, GDP shrank an annualized 0.4 percent, amid falling exports and a business-investment slump, compared with the median economist forecast for 0.4 percent growth. That followed a revised 3.8 percent drop in the third quarter, the Cabinet Office said.
2013 Advance
The S&P 500 has climbed 6.6 percent in 2013 as U.S. lawmakers reached a budget compromise. It has more than doubled since bottoming in March 2009 as the Federal Reserve conducted three rounds of bond buying to lower interest rates and boost economic growth.
Bearish U.S. stock options have fallen to the cheapest level in more than two years. Puts protecting against a 10 percent slide in the S&P 500 cost 7.88 points more than calls betting on a 10 percent gain, according to three-month options data compiled by Bloomberg. The price relationship known as skew fell to 7.49 on Feb. 1, the lowest since November 2010.
A report at 8:30 a.m. in Washington may show initial claims for U.S. unemployment insurance payments dropped to 360,000 last week, according to the median of 49 estimates in a Bloomberg survey of economists.
Cisco Sinks
Cisco lost 33 cents to $20.81 after the company forecast third-quarter revenue will increase 4 percent to 6 percent from a year earlier, indicating revenue of $12.1 billion to $12.3 billion. Analysts on average predicted sales of $12.2 billion, according to data compiled by Bloomberg.
Weight Watchers International Inc. tumbled 15 percent to $45.98. The company forecast annual earnings of $3.50 to $4 a share, compared with the $4.75 average estimate in a Bloomberg survey of analysts.
Applied Materials Inc. climbed 38 cents to $14.15 after the largest producer of chipmaking equipment forecast second-quarter sales will rise 15 percent to 25 percent from the prior period, indicating revenue of $1.81 billion to $1.97 billion. Analysts on average had estimated revenue of $1.81 billion.
Heinz Deal
Heinz rose $12.47 to $72.95. Buffett’s Berkshire Hathaway and 3G Capital agreed to buy Heinz as the billionaire chairman increases his bets on consumer products. The buyers will pay $72.50 a share, compared with yesterday’s closing price of $60.48, according to a statement distributed by Business Wire today. The deal is valued at about $28 billion including debt, according to the statement.
US Airways increased 9 cents to $14.75 after the company said it will combine with AMR’s American Airlines to create the world’s largest carrier. AMR’s bankruptcy creditors will own 72 percent of the new company, and US Airways stockholders will get 28 percent.
PepsiCo Inc. gained 1.7 percent to $72.75 after the world’s largest snack-food maker reported an increase in fourth-quarter net income to $1.66 billion, or $1.06 a share. Profit excluding some items was $1.09 a share. Analysts had projected $1.05, the average of estimates compiled by Bloomberg.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net
To contact the editors responsible for this story: Andrew Rummer at arummer@bloomberg.net; Lynn Thomasson at lthomasson@bloomberg.net
