BLBG: U.S. Stock Futures Advance As Federal Prepares To Meet
U.S. stock futures advanced, indicating the Standard & Poor’s 500 Index will gain for a fourth day, as a decline in housing starts bolstered expectations the Federal Reserve may stimulate the economy.
Oracle Corp. (ORCL), the world’s largest maker of database software, rallied 5.2 percent after profit topped analysts’ estimates. FedEx Corp. (FDX), operator of the world’s largest cargo airline, fell 2.1 percent after predicting lower profit than analysts estimated amid slowing economic growth in the U.S.
S&P 500 futures expiring in September rose 0.2 percent to 1,343.30 at 8:43 a.m. New York time. Dow Jones Industrial Average futures added 29 points, or 0.2 percent, to 12,715.
“It seems that the risks out there are just easing slightly,” Tom Wirth, who helps manage $1.5 billion as senior investment officer for Chemung Canal Trust Co., based in Elmira, New York, said in a telephone interview. “With respect to the Fed extending Operation Twist, they may do it. Yet whatever reaction the market has will be short lived.”
Equity futures rose even after government data showed that builders in the U.S. broke ground on fewer homes than forecast in May as a slump in the construction of apartments swamped a pickup in single-family houses. Fed policy makers will begin a two-day meeting today as Group of 20 leaders focus their response to Europe’s financial crisis at a summit in Mexico.
The central bank’s so-called Operation Twist plan, which involves selling $400 billion of Treasuries maturing in three years or less and buying an equal amount of bonds with a maturity of six years to 30 years, is set to expire this month.
Global Stocks
Global stocks and the euro pared gains earlier after Greek leaders said they would seek to renegotiate the terms of an international bailout. Spanish bond yields declined after the government met its target at a bill auction.
Concern about a global slowdown and a worsening of Europe’s debt crisis put the S&P 500 (SPX) on the brink of a so-called correction this month. It fell 9.9 percent from an almost four- year high in April through June 1. Since then, the lowest valuation in six months and bets on global policy action drove the measure up 5.2 percent through yesterday.
Oracle added 5.2 percent to $28.52. Chief Executive Officer Larry Ellison said Oracle won three cloud-computing deals against competitor Workday Inc. during the period ending in May, and also sold a high-end hardware system to Facebook Inc. Software license sales, an indicator of future revenue, rose 6.7 percent to $4 billion.
Microsoft Corp. (MSFT) gained 0.5 percent to $29.98. The company unveiled its own Windows-powered tablet computer called Surface, altering its strategy of focusing on software and relying on partners to make the machines in a renewed attempt to take on Apple Inc. (AAPL)’s iPad.
Economic Bellwether
FedEx, which is considered an economic bellwether because it carries everything from mobile devices to pharmaceuticals and financial documents, retreated 2.1 percent to $86.64. Weak air freight traffic on routes from Asia to North America and Europe hurt FedEx during the quarter through May 31, said Lee Klaskow, a Bloomberg Industries analyst in Skillman, New Jersey.
Growing doubts about the direction of U.S. economic policy may limit any stock-market gains in the next few months, according to Myles Zyblock, chief institutional strategist at RBC Capital Markets.
The CHART OF THE DAY displays a policy-uncertainty index that Zyblock cited in a note to clients yesterday. The gauge rose in May after dropping for five months in a row, and the increase offset most of the decline during that streak.
“Uncertainty has started to ramp up once again,” Zyblock wrote. He mentioned three reasons for the shift: this year’s presidential election, debate over increasing the federal debt ceiling, and a so-called fiscal cliff that may result from tax increases and spending cuts set for early next year.
Consumer Spending
Share prices may suffer along with consumer spending, hiring and investing because of “this domestically focused headwind” regardless of how the European debt crisis unfolds, the Toronto-based strategist wrote.
The Economic Policy Uncertainty Index set a record last August, when a near-failure to reach agreement on raising the debt limit led Standard & Poor’s to reduce the country’s credit rating from AAA for the first time.
The indicator is derived from estimates of U.S. economic growth and government purchases, Google News search results, and the number of expiring provisions in the federal tax code. Scott R. Baker, a graduate student at Stanford University, created the gauge with Stanford Professor Nicholas Bloom and University of Chicago Professor Steven J. Davis.
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
