BLBG: U.S. Stock Futures Fall as Investors Weigh Fed Stimulus
U.S. stock futures fell, signaling benchmark gauges will post their first back-to-back retreat this month, as investors weighed the strength of the economy to assess when the Federal Reserve may scale back stimulus.
Starbucks Corp. dropped 1.6 percent after saying it will pay Mondelez International Inc. $2.76 billion to settle a dispute over bagged coffee. Tesla Motors Inc. advanced 1.2 percent as co-founder Elon Musk said the company won’t recall its Model S after fires involving the electric sedan. Macy’s Inc. jumped 7.5 percent as earnings beat analysts’ estimates.
Futures on the Standard & Poor’s 500 Index expiring in December dropped 0.5 percent to 1,755.7 at 8:46 a.m. in New York. Dow Jones Industrial Average contracts lost 86 points, or 0.6 percent, to 15,624.
“As the earnings season is almost over, there seems to be some nervousness back in the market,” Heinz-Gerd Sonnenschein, an equity-market strategist at Deutsche Postbank AG, said by phone from Bonn, Germany. “The economy is back in focus. Everybody is looking for hints at what may come from the Fed. Institutional investors are weighing whether they’ll have time to change their investments in the first months of 2014, or if the Fed will act earlier.”
The S&P 500 climbed to a record on Oct. 29 as the Fed maintained its $85 billion in monthly asset purchases. Central bank support has helped propel the index higher by more than 160 percent (SPX) from its March 2009 low. The gauge has rallied 24 percent so far in 2013, poised for its best year in a decade, and is trading at 16 times projected earnings, more than the five-year average of 14 times profit, according to data compiled by Bloomberg.
Paring Target
Reducing bond purchases “ought to be on the table at upcoming meetings” by the Federal Open Market Committee, including Dec. 17-18, Fed Bank of Atlanta President Dennis Lockhart said yesterday. Central bank policy makers will probably scale back the monthly pace of bond buying to $70 billion at their March 18-19 meeting, according to the median of 32 estimates in a Bloomberg survey of economists on Nov. 8.
Investors have been weighing better-than-projected data to gauge whether the economy may be strong enough to withstand less stimulus. This week will bring reports on U.S. jobless-benefit claims and manufacturing in the New York area. Investors may get some insight into Fed policy thinking when Vice Chairman Janet Yellen testifies before the Senate Banking Committee tomorrow for her confirmation hearing to succeed Ben S. Bernanke as chairman.
BOE Outlook
In the U.K., the Bank of England brought forward its forecast for when unemployment will fall to the 7 percent level when it may consider raising interest rates. The jobless rate as measured by International Labour Organisation standards declined to 7.6 percent in the third quarter, the lowest since 2009, the Office for National Statistics said today.
Macy’s, NetApp Inc. and Cisco Systems Inc. are reporting results today. Of the 453 S&P 500 companies that have announced so far, 75 percent have beaten analysts’ income forecasts, data compiled by Bloomberg showed. Profits for the gauge will rise 4.7 percent in the third quarter and 6.2 percent in the final three months of the year, estimates compiled by Bloomberg show.
Starbucks slipped 1.6 percent to $79.30. An arbitrator ordered the payment to Mondelez to settle a dispute over Starbucks’s bagged-coffee business, consisting of $2.23 billion in damages and $527 million in interest and attorneys’ fees, the Seattle-based coffee-shop chain said late yesterday.
Starbucks, Mondelez
Starbucks revised its fiscal fourth quarter results to a loss of $1.64 a share, compared with earnings of 63 cents a share reported Oct. 30.
Mondelez, which yesterday said it would use the proceeds to buy back stock, rose 2.7 percent to $33.30.
Tesla added 1.2 percent to $139.40. The stock has tumbled 29 percent since Sept. 30 amid several reports of battery-related fires in Model S cars, and as the Palo Alto, California-based company posted third-quarter results that disappointed some investors.
“We’re about five times less likely to have a fire than an average gasoline car,” Musk, who is also the chief executive officer of the company and its biggest shareholder, said yesterday at a conference in New York. Reaction to the fires reported by some media was “extremely inaccurate and unreasonable,” Musk said.
Macy’s jumped 7.5 percent to $49.79. The department-store chain reported third-quarter earnings that beat analysts’ estimates. Cincinnati-based Macy’s same-store sales were up 3.5 percent, compared with the average estimate of 1.9 percent.
U.S. Steel Corp. (X) rallied 1.4 percent to $27.40 as Morgan Stanley upgraded its recommendation on the largest U.S. producer of the metal to overweight, the equivalent of buy, from equal weight.
To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net
To contact the editors responsible for this story: Andrew Rummer at arummer@bloomberg.net; Lynn Thomasson at lthomasson@bloomberg.net
