ECONOMIC INDICATORS

U.S. stock futures rise as investors watch corporate results

BLOOMBERG FILE PHOTO/TIM BOYLE
STOCK FUTURES ADVANCED in the U.S. following the biggest decline since June.
Posted 10/22/12

NEW YORK - U.S. stock futures advanced, following the biggest decline since June in the Standard & Poor’s 500 Index, as investors watched corporate results.

Peabody Energy Corp., the largest U.S. coal producer by volume, gained 6.8 percent as results beat estimates. Ancestry.com Inc. surged 7.8 percent after Permira Advisers LLP agreed to buy the company in a transaction valued at about $1.6 billion, gaining the world’s largest family-history website. Caterpillar Inc., the biggest maker of construction and mining equipment, slid 0.5 percent after forecasting sales growth that is the slowest in four years.

S&P 500 futures expiring in December rose 0.1 percent to 1,426 at 8:52 a.m. New York time. Dow Jones Industrial Average futures added 17 points, or 0.1 percent, to 13,269. The number of shares changing hands in Stoxx Europe 600 Index’s companies was 10 percent below the 30-day average at this time of day, according to data compiled by Bloomberg.

“It really comes down to earnings at this point,” said Peter Jankovskis, co-chief investment officer for Oakbrook Investments in Lisle, Illinois, which manages more than $3 billion. He spoke in a telephone interview. “We’ve seen many companies beating earnings estimates. Yet investors are keeping an eye on their ability to grow revenue.”

Earnings at about 69 percent of S&P 500 companies which reported third-quarter results beat analysts estimates, according to data compiled by Bloomberg. Sales missed forecasts at 59 percent of companies, the data showed.

Monetary stimulus

The S&P 500 rallied as much as 15 percent from a June low amid unprecedented monetary stimulus from the Federal Reserve to boost economic growth. Since peaking at its highest level since December 2007 on Sept. 14, the index has been stuck in a 37- point range on a closing basis. The S&P 500 dropped 1.7 percent on Oct. 19, the most since June 21.

Peabody Energy gained 6.8 percent to $27.65. The company reported third-quarter earnings that beat analysts’ estimates after selling more coal from its mines in Wyoming’s Powder River Basin.

Ancestry.com surged 7.8 percent to $31.47. Permira will pay $32 a share, the companies said today in a statement. The price is 41 percent higher than Ancestry.com’s closing price on June 5, the last day of trading before press reports that the company had hired a financial advisor for a possible sale.

Caterpillar slid 0.5 percent to $83.40. Sales growth will be in a range of up 5 percent to down 5 percent next year, the Peoria, Illinois-based company said today in a statement. That compares with year-over-year growth of 31 percent in 2010, 41 percent in 2011 and an estimated 13 percent this year.

Beating assets

U.S. stocks are beating every major asset class for the first time in 17 years even as economic growth weakens and profits rise at the slowest rate since 2009.

The S&P 500 has rallied 14 percent in 2012, beating Treasuries, corporate bonds, commodities, the dollar and equities in Asia and Europe, data compiled by Bloomberg show. The last time that happened, in 1995, the S&P 500 was posting the biggest annual advance of the last five decades. With a price-earnings ratio close to today’s level, the index gained another 93 percent in the next 2 1/2 years.

For all the concern about unemployment and manufacturing growth, the best assets this year remain American companies after unprecedented steps by the Federal Reserve to support growth. Forecasts for a rebound in the U.S. economy and the central bank’s pledge to keep interest rates near zero for years convinced bulls the S&P 500 will extend gains. Bears say political gridlock will drag down prices after monetary stimulus wears off.

“We see good earnings growth and improving economic outlook, we see good equity valuations and easy monetary policy, we see skeptical investors and low positioning in equity assets,” said Max King, a multi-asset strategist at Investec Asset Management in London, which oversees $100 billion. “This is a major green light for equities and the fact that people don’t see it, is great.”

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