U.S. Stock Futures Drop After Apple, American Express Results

By Jeff Kearns and Lynn Thomasson

July 21 (Bloomberg) -- U.S. stock futures tumbled after the close of U.S. exchanges, dragged down by lower-than-estimated earnings at American Express Co. and disappointing forecasts at Apple Inc. Treasury yields and the dollar also dropped.

American Express, the biggest U.S. credit card company by purchases, fell 11 percent from its 4 p.m. close after second- quarter profit trailed analysts' estimates by 32 percent. Apple, maker of the iPod music player, lost 6.5 percent after saying sales and earnings will fall short of projections. SandDisk Corp. tumbled 12 percent after reporting a loss.

``This whole earnings season will be somewhat choppy,'' said Eric Marshall, who helps oversee $1.4 billion at Hodges Capital Management Inc. in Dallas. ``The technology companies that are more tied to making components or semiconductors or cell phones, those are more likely to be impacted by weakness in consumer spending.''

Futures on the Standard & Poor's 500 Index expiring in September decreased 12.3, or 1 percent, to 1,249.3 as of 5:52 p.m. in New York. Dow Jones Industrial Average futures slipped 112, or 1 percent, to 11,353. Nasdaq-100 Index futures dropped 31, or 1.7 percent, to 1,796.5.

The Financial Select Sector SPDR, an exchange-traded fund tracking 88 bank and brokerage stocks, lost 2.2 percent after American Express said consumer defaults increased. An index of financial companies ended a three-day advance in regular trading, dropping 0.9 percent to bring their 2008 decline to 29 percent.

Apple, SanDisk

Futures on the Nasdaq 100 fell to a three-month low following forecasts from Apple, SanDisk Corp. and Texas Instruments. Information technology companies in the S&P 500 are projected to report a 12.3 percent gain in second-quarter profits, the most among 10 industries, according to data compiled by Bloomberg.

The dollar fell 0.2 percent against a basket of major currencies after 4 p.m. in New York, while the yield on the 10- year Treasury note fell more than 2 basis points to 4.0377 percent.

American Express retreated $4.39 to $36.51 after it said second-quarter profit fell 37 percent on worse-than-expected consumer defaults. American Express, Capital One Financial Corp. and Discover Financial Services shares have dropped by more than a third in the past year amid concern the lenders underestimated the depth of the U.S. slowdown.

Capital One, the credit-card company that set aside $1.9 billion in the fourth-quarter for loan losses, slipped 6.1 percent to $39.50. Discover, the credit card company spun off by Morgan Stanley, declined 6.2 percent to $14.25.

Apple lost $2.16 to $15.77. The company predicted a fourth- quarter profit of $1 a share and sales of $7.8 billion, below the $1.24 a share in profit and $8.3 billion in sales anticipated by analysts in a Bloomberg survey.

`Everyone Watches'

``Apple is a stock that everyone watches,'' said Mark Mowrey, an analyst at Al Frank Asset Management in Laguna Beach, California. ``When you've got valuations like this, any slight disappointment is going to wreck the multiples that give rise to these kind of valuations.''

SandDisk dropped $2.16 to $15.77. The biggest maker of memory cards for digital cameras reported a second-quarter loss, excluding certain items, of 10 cents a share as consumers cut spending and a glut drove prices down. SandDisk's loss this quarter trailed the average analyst estimate for profit of 12 cents a share compiled from a Bloomberg survey.

Phone Chip Demand

Texas Instruments Inc., the second-largest U.S. semiconductor maker, slid after it said profit fell 3.6 percent, the first decline in four quarters, as orders for mobile-phone chips slowed. The shares declined 12 percent to $25.09.

Second-quarter net income declined to $588 million, or 44 cents a share, from $610 million, or 42 cents, a year earlier, the Dallas-based company said today in a statement. Sales fell 2.1 percent to $3.35 billion, missing the $3.39 billion estimate of analysts in a Bloomberg survey.

The S&P 500 slipped 0.68 point to 1,260 in regular trading today as U.S. stocks fell for the first time in four days, led by retailers and drugmakers, after oil prices climbed and a cholesterol drug sold by Merck & Co. and Schering-Plough Corp. was linked to cancer. The benchmark for U.S. equities has slipped 14 percent this year and fell to 1,214.91, the lowest in more than two years, on July 15.

To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net; Lynn Thomasson in New York at lthomasson@bloomberg.net.