ECONOMIC INDICATORS

U.S. stock futures fall as New York-area manufacturing shrinks

BLOOMBERG FILE PHOTO/JIN LEE
U.S. STOCK-INDEX FUTURES dropped, indicating the Standard & Poor’s 500 Index will fall for a third straight day.
Posted 8/14/12

NEW YORK - U.S. stock-index futures dropped, indicating the Standard & Poor’s 500 Index will fall for a third straight day, after a Federal Reserve report showed manufacturing in the New York area unexpectedly contracted.

Deere & Co. dropped 5.3 percent as profit trailed analysts’ estimates and the largest maker of farm equipment cut its full- year earnings forecast. Staples Inc. tumbled 17 percent after reducing its sales forecast as the retailer assumes slower growth for in the U.S. Target Corp., the second-largest U.S. discount retailer, gained 1.1 after profit topped estimates as sales gained at established locations.

S&P 500 futures expiring in September lost 0.2 percent to 1,399 at 8:55 a.m. in New York. The benchmark gauge on Aug. 10 completed its longest rally since December 2010 amid speculation the Federal Reserve may introduce further stimulus measures. Dow Jones Industrial Average futures declined 24 points, or 0.2 percent, to 13,109 today.

“There’s an element of wait and see in the markets,” said Kully Samra, who manages U.K.-based clients for Charles Schwab Corp., which has $1.8 trillion of assets globally. “What happens with industrial production is going to be important. Manufacturing has been alright in the past, the question is whether that’s turning now.”

The S&P 500 slipped less than 0.1 percent yesterday as a slump in technology and financial shares reversed an earlier rally amid better-than-estimated retail sales. Intraday price swings in the benchmark index narrowed to a daily average of 0.7 percent from Aug. 6 through yesterday, the smallest fluctuation over a comparable period since January 2011, according to data compiled by Bloomberg.

Economic reports

Manufacturing in the New York area unexpectedly contracted in August for the first time since October, indicating U.S. factories are burdened by the global economic slowdown, a report by Federal Reserve Bank of New York showed today. A Fed report due at 9:15 a.m. in Washington may show output at factories, mines and utilities increased 0.5 percent in July, following a 0.4 percent gain a month earlier, according to the median forecast in a Bloomberg News survey.

Deere lost 5.3 percent to $75.91 after reporting fiscal third-quarter profit that trailed analysts’ estimates after demand slowed outside the U.S. and Canada. Profit for the full year ending Oct. 31 will be $3.1 billion, Deere said, compared with its May forecast of $3.35 billion and the $3.33 billion average of 15 estimates.

Staples tumbled 17 percent to $11.15. The retailer’s results in its second quarter were worse than anticipated. Sales will be unchanged this year compared to the year-earlier period, the Framingham, Massachusetts company said in a statement. The company had forecast growth in the low single-digits in May.

Facebook falls

Facebook Inc. lost 0.6 percent to $20.25 after a regulatory filing showed one of its directors gave himself flexibility to sell more shares. Peter Thiel, one of its earliest investors, converted more than 9 million shares to Class A from Class B, according to a document filed Aug. 10.

Target added 1.1 percent to $64.05. The retailer plans to boost sales growth by opening stores in Canada next year, its first expansion outside the U.S. Until then, Target has been working to spur sales by adding fresh food sections and offering customers incentives to spend with its credit card, which gives 5 percent off purchases.

National Oilwell Varco Inc. climbed 2 percent to $77.80 after Warren Buffett’s Berkshire Hathaway Inc. added a stake during the second quarter, holding 2.84 million shares of the oilfield-equipment maker, according to a filing with the Securities and Exchange Commission.

JDS Uniphase

JDS Uniphase rose 5.3 percent to $11.91 as the company late yesterday forecast first-quarter sales between $415 million and $435 million, compared with the average analyst estimate for $426.2 million at the time of the company’s release.

Foreign investors are pouring money into U.S. equities, helping sustain a rally just as Americans take advantage of market gains to bail out. Foreign investors purchased a net $322.5 billion of U.S. stocks during the three years ended March 2012, based on the latest quarterly data from the U.S. Bureau of Economic Analysis.

During the same period, Americans pulled $251.1 billion from U.S. equity mutual funds, according to data compiled by the Investment Company Institute, a Washington-based trade group.

Foreign buying will likely continue, according to Chris Konstantinos at Riverfront Investment Group LLC, as U.S. stocks lure investors from overseas amid a contraction in Europe’s economy, the weakest Chinese growth since 2009 and more than a decade of deflation in Japan.

“America, structurally, is one of those attractive markets in the world,” Konstantinos, who helps oversee $3.2 billion as director of international portfolio management at Riverfront in Richmond, Va., said in a phone interview last week. “I look at all of them, and it’s hard for me to find markets that are better looking than the U.S.”

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