ECONOMIC INDICATORS

U.S. stock futures fall on concern Europe’s crisis will worsen

BLOOMBERG FILE PHOTO/JIN LEE
U.S. STOCK FUTURES retreated, following last week’s decline, on concern a meeting of European leaders will fail to help contain the region’s debt crisis.
Posted 6/25/12

NEW YORK - U.S. stock futures retreated, following last week’s decline, on concern a meeting of European leaders will fail to help contain the region’s debt crisis.

Bank of America Corp. and JPMorgan Chase & Co. dropped at least 0.9 percent as a measure of European lenders slumped. Caterpillar Inc. and Alcoa Inc. slipped more than 1 percent to pace losses among the largest companies. Facebook Inc., the biggest social-networking operator, declined 0.6 percent following a 22 percent advance over the previous two weeks.

Standard & Poor’s 500 Index futures expiring in September slid 0.8 percent to 1,316.60 at 8:17 a.m. New York time, after snapping a two-week rally on June 22. Dow Jones Industrial Average futures declined 83 points, or 0.7 percent, to 12,485.

Equity futures followed European stocks lower as the region’s leaders prepare to meet in Brussels on June 28. Billionaire investor George Soros called on Europe to start a fund to buy Italian and Spanish bonds, warning that a failure by leaders meeting this week to produce drastic measures could spell the demise of the currency. German Chancellor Angela Merkel said in a June 15 speech that she opposed “premature” proposals for issuing euro-area bonds.

“With Germany just not giving in to the requests for largess that the rest of Europe wants them to disperse in the form of socializing debt obligations in the euro region, nothing of substance will come out of the summit,” Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, wrote today. “Markets today are realizing that.”

Economic data

In the U.S., data may show that demand for new homes probably rose in May for the second month as mortgage rates dropped, bolstering the residential real-estate market while other parts of the economy cool, economists predicted. In a bid to reduce unemployment, sustain housing and prevent a global slowdown from stalling the expansion, the Federal Reserve last week extended a program to keep long-term interest rates low.

Signs of slower U.S. growth and concern over Europe’s debt crisis pushed stocks lower last week. The S&P 500 has fallen 5.9 percent from an almost four-year high in April.

Financial companies retreated as a measure of European lenders lost 1.6 percent. Bank of America dropped 2 percent to $7.78. JPMorgan decreased 0.9 percent to $35.66.

Companies which are most-dependent on the pace of economic growth also retreated. Caterpillar, the world’s largest maker of construction equipment, fell 1.4 percent to $83.80. Alcoa, the largest U.S. aluminum producer, slid 1 percent to $8.53.

Facebook lost 0.6 percent to $32.85.

Energy stocks

At a time of record fuel demand, bountiful oil and natural gas, and expanding economies, no stocks are doing worse in the world than energy producers from BP Plc to Hess Corp.

The MSCI World Energy Index has declined 9.6 percent this year, more than any other group, according to data compiled by Bloomberg. The gauge has climbed 45 percent since equities bottomed in 2009, less than any industry with earnings tied to economic growth. In the U.S., the stocks are at the cheapest levels relative to the Standard & Poor’s 500 Index since 2009.

The divergence reflects the transformation of an industry where growing consumption of energy has been met with even bigger gains in supply. U.S. crude inventories are the highest since 1990 and natural gas prices have lost 38 percent in 12 months amid a glut spurred by hydraulic fracturing.

Bears say energy producers, making up about 10 percent of global stocks, will keep equities from advancing. Bulls say the market will rally when their shares rebound.

“The S&P 500 will have a tough time making meaningful progress until the energy sector bottoms and begins to move higher,” Jim Russell, the Cincinnati-based chief equity strategist at U.S. Bank Wealth Management, which oversees about $116 billion, said in a phone interview on June 20. “Even though the valuations of the stocks are cheap, the fundamentals have not yet bottomed.”

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