Bloomberg News

U.S. Stock Futures Fall Amid Speculation Over Stimulus

August 23, 2012

U.S. stock futures fell, as the Standard & Poor’s 500 Index headed toward its first weekly decline in seven weeks, amid speculation whether central banks in the U.S. and China will ease monetary policy further and European leaders will be able to solve the region’s debt crisis.

Hewlett-Packard (HPQ:US) Co. dropped 5.4 percent after forecasting full-year earnings that missed analysts’ estimates as demand slumped. Big Lots Inc. (BIG:US) erased 17 percent after lowering its annual earnings projection. Best Buy Co. rose 3.8 percent as the company is said to have resumed talks with founder Richard Schulze about a due diligence agreement.

S&P 500 futures expiring in September slumped 0.3 percent to 1,408.3 at 8:45 a.m. in New York. U.S. stocks erased losses yesterday as minutes from the Federal Open Market Committee’s last meeting showed many members judged that more stimulus “would likely be warranted fairly soon.” Dow Jones Industrial Average futures lost 27 points, or 0.2 percent, to 13,129.

“Fed minutes back liquidity in the stock market, while China plays too,” said Graham Bishop, an equity strategist at Exane BNP Paribas in London. “The weak Chinese manufacturing data puts monetary easing back on the agenda.”

Fed Bank of St. Louis President James Bullard said the FOMC minutes were no longer as relevant because the U.S. economy has picked up in the past month. The S&P 500 has rallied 11 percent since June 1 on speculation global central banks will take action to stimulate growth.

In China, a report today indicated that manufacturing will contract at a faster pace in August, signaling the country’s economy needs more monetary and fiscal stimulus to secure a second-half rebound in growth.

China Manufacturing

A preliminary reading of 47.8 for a purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics compared with July’s final 49.3 figure. If confirmed, it would be the lowest level since November and the 10th month that the reading has stayed below 50, the longest run in the index’s eight-year history.

European stocks pared gains earlier after German Finance Minister Wolfgang Schaeuble said that allowing Greece more time to meet its debt obligations would not solve the country’s problems and would increase costs for creditors.

German Chancellor Angela Merkel said Europe is in one of its deepest crises and while the path to a solution is inevitably “long and arduous,” the euro region will emerge stronger. She hosts French President Francois Hollande as the leaders of Europe’s two biggest economies seek common ground on Greece and the wider euro-area debt crisis. Greece’s Prime Minister, Antonis Samaras, will follow Hollande to Berlin tomorrow and travel on to Paris on Aug. 25.

New Homes

Purchases of new homes in the U.S. probably rose in July for the third time in four months, economists said before a report today, scheduled to be released in Washington by the Commerce Department at 10 a.m. in New York. Sales, tabulated when contracts are signed, climbed 4.3 percent to a 365,000 annual pace, according to the median estimate in a Bloomberg survey of 72 economists.

The number of Americans filing applications for unemployment benefits climbed last week to a one-month high, showing little progress in the labor market. Jobless claims rose by 4,000 for a second week to reach 372,000 in the period ended Aug. 18, Labor Department figures showed today in Washington. The median forecast of 41 economists surveyed by Bloomberg called for 365,000.

Hewlett-Packard

Hewlett-Packard, the biggest maker of personal computers, dropped 5.4 percent to $18.17. Profit excluding some costs will be $4.05 to $4.07 a share in the year that ends in October, Palo Alto, California-based Hewlett-Packard said yesterday in a statement. That’s at the low end of a forecast for $4.05 to $4.10 issued in May and below the average $4.08 analyst estimate compiled by Bloomberg.

The company suffered another quarter of slumping demand for personal computers and services aimed at businesses, underscoring the turnaround challenge facing Chief Executive Officer Meg Whitman.

Big Lots, the Columbus, Ohio-based discount retailer, plunged 17 percent to $32.42. Profit excluding some items will decline to $2.80 to $2.95 a share this year, reduced from a previous projection of $3.25 to $3.40 a share. Analysts anticipated $3.30, the average of 16 estimates compiled by Bloomberg.

Best Buy rose 3.8 percent to $18.40. The largest U.S. electronics retailer has resumed talks with Schulze about an agreement that would allow him to conduct due diligence in his effort to acquire the company, said two people with knowledge of the matter.

Hertz Global Holdings Inc. (HTZ:US) gained 1.2 percent to $12.55. The auto-rental company, which has been trying to acquire Dollar Thrifty Automotive Group Inc. for more than two years, has begun soliciting Dollar Thrifty shareholders to gauge their selling price, according to three people with knowledge of the process.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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Companies Mentioned

  • HPQ
    (Hewlett-Packard Co)
    • $34.98 USD
    • -0.17
    • -0.49%
  • BIG
    (Big Lots Inc)
    • $43.81 USD
    • 0.26
    • 0.59%
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