BLBG: U.S. Index Futures Slip as Oil Bear Market Conjures Growth Worry
U.S. stock-index futures declined, signaling equities may fall for a second day for the first time in more than a month, as concern resurfaced about growth prospects with oil back in a bear market.
Contracts on the S&P 500 Index expiring in September slipped 0.2 percent to 2,160.5 at 8:54 a.m. in New York, amid slides in European and Asian equities. Dow Jones Industrial Average futures lost 22 points, or 0.1 percent, to 18,304 today. U.S. shares ended little changed on Monday, after briefly approaching a fresh record, as tumbling crude prices triggered a slump in energy companies, raising doubt that economic growth and corporate profits will improve.
“When you have oil dropping to these levels and a string of weak economic data out of the U.S., of course people start to worry about growth again,” said Heinz-Gerd Sonnenschein, an equity strategist at Deutsche Postbank AG in Bonn, Germany. “When you consider that U.S. equities have had quite a good run lately and they’re just so expensive right now, it seems like a sensible time to take some profits and sit the market out.”
Better-than-forecast earnings and economic data helped support the S&P 500’s run to its first all-time high in more than 13 months, with the index rebounding as much as 8.7 percent after the U.K. vote to leave the European Union rattled markets worldwide. The rally lost steam last week, though, as a report showed weaker-than-expected growth in the second quarter. Manufacturing also expanded at a slower pace last month, according to data released on Monday.
At 18.4 times this year’s projected earnings, the S&P 500 is trading near its highest multiple in more than a decade. Still, stronger-than-estimated earnings results and speculation that central banks will maintain loose monetary policies to buttress growth have helped to underpin equities as they hover near record levels.
Traders have pushed back their expectations for the next Federal Reserve interest-rate increase, with the first month with at least even odds for a hike now June 2017 compared with February a week ago. The Fed last week held rates unchanged as forecast but reiterated its intention to raise them gradually.
With investors looking for signs that growth is picking up, a report today showed consumer purchases climbed a bit more than anticipated in June, exceeding a gain in incomes that prompted American households to tap into savings. Data on employment, durable-goods orders and factory activity are due later this week.
More than two-thirds of S&P 500 companies have reported this earnings season, and about 79 percent have topped profit estimates while 57 percent beat sales projections. Analysts predict net income at S&P 500 companies fell 3.2 percent in the second quarter, better than estimates for a 5.8 percent contraction in mid-July. American International Group Inc., Electronic Arts Inc. and Devon Energy Corp. are among those scheduled to release results today.
Among companies moving in early New York trading, Frontier Communications Corp. lost 2.6 percent as quarterly sales and profit was short of analysts’ estimates. Pfizer Inc. slipped 1.6 percent after leaving its full-year forecast unchanged, even as second-quarter profit and sales exceeded predictions.
Procter & Gamble Co. added 0.8 percent after its profit exceeded forecasts, helped by rising sales in its health-care division and continued cost cuts. SodaStream International Ltd. jumped 11 percent after its earnings topped the highest of analyst estimates.
