BLBG: U.S. Stock-Index Futures Drop as Spending Cuts Loom
U.S. stock-index futures declined as investors braced for automatic cuts in federal spending due to take effect tonight, while awaiting data on manufacturing and consumer spending.
Groupon (GRPN) Inc. rallied 4.4 percent in early New York trading after firing its chief executive officer. Palo Alto Networks Inc. dropped 2 percent after making revenue projections.
Standard & Poor’s 500 Index (SPX) futures expiring this month slipped 0.5 percent to 1,506.3 at 7:41 a.m. in New York. Contracts on the Dow Jones Industrial Average lost 52 points, or 0.4 percent, to 13,986. U.S. stocks erased gains in the final minutes of trading yesterday after a Senate vote kept $85 billion of automatic spending cuts in place.
“Many market observers have been expecting that the budget cuts will take effect,” said Andreas Nigg, head of equity and commodity strategy at Vontobel Asset Management in Zurich. “Investors may wait for U.S. data today to justify any movements in either direction. It appears that the U.S. economy has enough momentum, but a weakening macro backdrop just at the point when sequestration starts would be cause for concern.”
Democrats and Republicans are in a standoff over how to replace the cuts totaling $1.2 trillion over nine years, $85 billion of which would occur in this fiscal year. Republicans reject Democrats’ call for higher taxes on top earners to replace part of the spending reductions.
Meeting President
President Barack Obama’s meeting with congressional leaders today won’t yield a breakthrough, members of both parties say.
Republicans John Boehner, the House speaker, and Mitch McConnell, the Senate minority leader, and Democrats Harry Reid, the Senate majority leader, and Nancy Pelosi, the House minority leader, will attend the morning meeting.
A report at 10 a.m. New York time may show manufacturing in the world’s biggest economy expanded for a third month in February. Economists surveyed by Bloomberg projected a reading of 52.5 for the Institute for Supply Management’s factory index. Numbers greater than 50 signal expansion.
Figures from the Commerce Department today are projected to show consumer spending is holding up. Household purchases advanced 0.2 percent in January for a second month, according to the Bloomberg survey median before the 8:30 a.m. release.
Fed Actions
Federal Reserve Bank of Chicago President Charles Evans said the Fed should press on with $85 billion in monthly bond buying, warning that a premature withdrawal of stimulus risks hobbling the recovery.
“We need to be careful not to undermine our own policies and remove accommodation prematurely, as the Japanese did,” Evans said yesterday in a speech in Des Moines, Iowa.
Groupon advanced 20 cents to $4.73 in premarket trading. The daily-deals company ousted Andrew Mason as chief executive officer a day after reporting results that disappointed investors. Executive Chairman Eric Lefkofsky and Vice Chairman Ted Leonsis will oversee the company as it seeks a successor.
Deckers Outdoor Corp. jumped 7.4 percent to $43.40 in premarket trading after the owner of the Ugg brand forecast a gain of about 7 percent in 2013 revenue that exceeded analysts estimates.
Palo Alto Networks dropped $1.23 to $59.90 in early New York trading. The company predicted third-quarter revenue of $100 million to $104 million, compared with the average analyst estimate of $101.8 million.
Pepco Holdings Inc. (POM) may move after the supplier of electricity and natural gas to mid-Atlantic states said it estimates earnings per share of $1.05 to $1.20 this year, trailing analysts’ projections that called for $1.23. Fourth- quarter earnings per share of 19 cents missed the 20 cent average analyst estimate.
To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
