BLBG: U.S. Stock Futures Are Little Changed Before Euro-Area Meeting
U.S. stock futures retreated, following a four-week gain in the Standard & Poor’s 500 Index, as commodities slumped after signs of a deeper Chinese slowdown.
El Paso Corp. (EP) dropped 1.5 percent to pace losses in energy producers amid concern of slower demand for commodities. Bank of America Corp. (BAC) and Citigroup Inc. (C) fell at least 0.8 percent as banks retreated after the cost of insuring against default on European sovereign bonds rose to the highest in eight weeks. Oracle Corp. (ORCL) slumped 1.2 percent after the world’s second- largest software maker was cut at Jefferies Group Inc.
S&P 500 futures expiring in June lost 0.2 percent to 1,364.60 at 9:03 New York time. The benchmark index for American equities rose 2.1 percent in four weeks. Dow Jones Industrial Average futures slid 17 points, or 0.1 percent, to 12,846 today.
“It’s been a much better start to the year than most investors had expected,” Henrik Drusebjerg, a Copenhagen-based strategist at Nordea Bank AB who helps oversee $230 billion, said in an interview. “If there is anything indicating that global growth is having problems, people will be very quick to take some profits.”
The S&P 500 gained 9 percent this year through March 9 amid better-than-expected data about the U.S. economy and as companies exceeded analysts’ profit forecasts for a 12th straight quarter.
Equity futures fell today as China had the biggest trade deficit last month in at least 22 years, the weakest January- February factory-production gain since 2009, and retail sales were below the median economist estimate, government data showed March 9 and 10. The central bank said in a statement today it will maintain a prudent monetary policy while fine-tuning and taking preemptive measures as appropriate.
Commodity Shares
Energy and raw material producers slumped as the S&P GSCI index of 24 commodities lost 1 percent. El Paso retreated 1.5 percent to $28.95.
Banks declined amid concern about Europe’s debt crisis after the declaration of a credit event triggering $3.2 billion of Greek debt protection contracts. Euro-area finance ministers gather in Brussels today to sign off on the 130 billion-euro ($170 billion) second rescue package for Greece. They’ll also focus on Spain’s budget-cutting efforts and Portugal’s aid program, underscoring their desire to prevent contagion.
Bank of America lost 1 percent to $7.97. Citigroup slid 0.8 percent to $33.92.
‘Greater Challenges’
Oracle fell 1.2 percent to $29.77. The company was cut to hold from buy at Jefferies, which cited “greater challenges” to its engineered systems strategy.
United Continental Holdings Inc. slumped 2.1 percent to $19.40. Southwest Airlines Co. (LUV) declined 1.3 percent to $8.37. The shares were cut to neutral from buy at Bank of America.
Transportation and industrial shares are diverging in the U.S., a signal that equity investors are starting to agree with what the bond market already knows: this economic recovery will remain sluggish for months to come.
The Dow Jones Transportation Average has fallen 3.9 percent from its six-month high on Feb. 3, while the Dow Jones Industrial Average (INDU) added 0.5 percent. The gauge of 20 shipping companies from FedEx Corp. to United Continental peaked before the rest of the market when the technology bubble popped in 2000 and began slipping into a bear market three months before broader benchmark indexes in 2007.
Transport Stocks
While Laszlo Birinyi, the founder of Birinyi Associates Inc., says falling transport stocks don’t signal an end to the three-year bull market that doubled the S&P 500, money managers at Robert W. Baird & Co. and Legg Mason Inc. say the 25 percent rise in the index since October may have gone too fast. Transport stocks are falling as 10-year Treasury yields stay near 2 percent, with economists forecasting the slowest post- recession recovery since World War II.
“In a healthy market, everything is going in the same direction,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird, which oversees $85 billion. “When that starts to diverge, that raises a flag that potential trouble may be brewing.”
Michael Kors Holdings Ltd. dropped 4.4 percent to $47.40. The luxury-goods maker and retailer named for the designer who founded it filed for a secondary offering of 25 million shares.
Monster Beverage Corp. (MNST)’s escalating profit from energy drinks pumped full of caffeine and nitrous oxide may tempt acquirers to chase what would be the most expensive takeover in the industry’s history.
Selling Juices
After the stock more than doubled in the last year, Monster Beverage is valued at 20 times earnings before interest, taxes, depreciation and amortization, the priciest multiple of any North American soft-drink maker greater than $500 million, according to data compiled by Bloomberg that includes net debt. The $10.4 billion company, which got its start selling juices in the 1930s, has the highest operating margins in the industry and is projected to boost earnings 70 percent in the next three years, analysts’ estimates compiled by Bloomberg show.
“What Monster’s so successfully done in the last few years is proven that demand for energy drinks is fairly universal among young people,” Caroline Levy, a beverage and household products analyst for Credit Agricole Securities USA Inc. in New York, said in a telephone interview. “This business is now too big to ignore. If you’re a player in soft drinks, I think it’s very hard not to be in the highest-margin, highest-growth category out there.”
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
