U.S. Stock Futures Drop as Fannie, Freddie Tumble, Oil Rallies

By Adria Cimino and Michael Patterson

July 11 (Bloomberg) -- U.S. stock futures tumbled, indicating the Standard & Poor's 500 Index will extend its longest stretch of weekly losses since 2004, as oil jumped to a record and concern grew that a government takeover of Fannie Mae and Freddie Mac may wipe out shareholders.

Fannie Mae and Freddie Mac, the largest buyers of U.S. home loans, plunged after a person familiar with the discussions said a government takeover of one or both companies is among several options being considered by the White House. Wal-Mart Stores Inc. and Apple Inc. declined after crude futures advanced to a record above $145 a barrel. General Electric Co. climbed, limiting the market's drop, after posting second-quarter profit that matched analysts' estimates.

S&P 500 futures expiring in September lost 12.3, or 1 percent, to 1,242.2 at 8:12 a.m. in New York. Dow Jones Industrial Average futures fell 101 to 11,116 and Nasdaq-100 Index futures slipped 15.75 to 1,828.50. Europe's Dow Jones Stoxx 600 Index lost 1.6 percent. Asian shares rose.

``We're very cautious on the financials and unfortunately we keep finding reasons to stay cautious,'' Jack Caffrey, a New York-based equity strategist at JPMorgan Private Bank, which oversees about $300 billion, said in an interview on Bloomberg Television. ``You have this sector under pressure and it will likely remain under pressure.''

The S&P 500, which fell into a bear market for the first time since 2002 this week, is headed for its sixth straight weekly decline. The index has erased a 12 percent rally that was spurred by a government-backed a rescue of Bear Stearns Cos. for less than its market value in March. Surging energy costs, deepening credit losses and rising unemployment threaten to reduce corporate profits even as Federal Reserve officials consider raising interest rates to fight inflation.

Fannie, Freddie

Fannie Mae tumbled $4.56, or 35 percent, to $8.64. Freddie Mac lost $2.10, or 26 percent, to $8. Representative Spencer Bachus, the senior Republican on the House Financial Services Committee, said yesterday that if the government comes to the assistance of Fannie and Freddie, equity investors shouldn't expect the government to halt a tumble in the companies' shares.

Wal-Mart, the world's largest retailer, lost 29 cents to $56.92. Apple, maker of the iPhone and Macintosh computers, declined $1.73 to $174.90

Crude oil rose more than $4 to a record $145.98 a barrel on concern that Israel may be preparing to attack Iran, while a strike in Brazil and renewed militant activity in Nigeria threaten to cut supplies.

GE added 17 cents to $27.81. The company's second-quarter profit fell 3.9 percent, matching analysts' estimates on a per- share basis after a surprise earnings slump in the year's first three months that hurt its stock price.

Chief Executive Officer Jeffrey Immelt repeated the 2008 forecast for $2.20 to $2.30 a share, GE said in a statement.

To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net.