By Henrietta Rumberger and Eric Martin
July 29 (Bloomberg) -- U.S. stock futures rose as Amgen Inc. and U.S. Steel Corp. posted better-than-estimated profits and Merrill Lynch & Co.'s sale of mortgage bonds spurred speculation that banks will overcome failed investments.
Amgen, the world's largest biotechnology company, advanced after raising its 2008 forecast and saying an experimental osteoporosis drug prevented fractures. U.S. Steel rallied on second-quarter earnings that more than doubled because of higher prices. Financial companies climbed on Merrill's plans to sell $8.5 billion of stock and liquidate $30.6 billion of bonds at a fifth of their face value to shore up credit ratings.
Futures on the Standard & Poor's 500 Index expiring in September added 4.5 to 1,239.6 at 9:15 a.m. in New York. Dow Jones Industrial Average futures gained 25 to 11,161 and Nasdaq- 100 Index futures climbed 6.5 to 1,820.25.
``Financials have underperformed significantly this year, yet we still have them in our portfolio with the anticipation that things will improve,'' Michael Koskuba, who helps oversee $62 billion as a portfolio manager at Victory Capital Management, said in an interview with Bloomberg Television.
U.S. stocks tumbled yesterday and the Dow average lost more than 200 points for the second time in three days after the International Monetary Fund said there is no end in sight to the housing slump.
Amgen rallied $2.52 to $63. The company said second-quarter net income fell 7.7 percent to $941 million as sales of the anemia medicines Aranesp and Epogen declined. Profit excluding certain costs was $1.14 a share, exceeding the $1.03 average estimate of 19 analysts surveyed by Bloomberg.
U.S. Steel Corp., the second-largest U.S.-based steelmaker by market value, gained $9.66, or 6.5 percent, to $154.99. Excluding certain items, per-share profit was $5.67 in the second quarter, topping the $3.82 average estimate of 14 analysts in a Bloomberg survey.
Merrill's Plan
Merrill swung between gains and losses after saying it agreed to sell $30.6 billion of collateralized debt obligations -- the mortgage-related bonds that have caused most of the firm's losses -- for $6.7 billion. The sale will result in a third-quarter pretax writedown of $4.4 billion, Merrill said.
The shares are trading closer to ``fair value'' after slumping 12 percent yesterday, Oppenheimer's Whitney wrote in a note to clients.
`Applaud This Purging'
``We applaud this purging of assets as an attempt to cut its losses and focus on stabilizing its platform and righting the franchise toward growth,'' Whitney wrote. While the stock ``still sells at a premium to book value and is expensive in our opinion, we believe the stock is getting closer to fairly valued levels as now the hardest work is behind the company.''
Whitney increased her 2008 loss estimate for Merrill to $10.50 a share from $8.37 and maintained her ``underperform'' rating on the stock.
Lehman Brothers Holdings Inc. added 23 cents to $15.27. The XLF, as the Financial Select Sector SPDR Fund is known, increased 1 percent to $20.10. The exchange-traded fund tracks bank and broker stocks.
Colgate-Palmolive Co. gained after the world's biggest toothpaste maker said second-quarter profit rose, topping analysts' estimates, on an increase in prices and higher sales in Latin America and Asia. Excluding one-time costs, earnings beat the average estimate of analysts by 4 cents a share. The shares rose 64 cents to $70.20.
General Motors Corp. climbed 25 cents to $11.25. AMR Corp., parent of American Airlines, added 15 cents to $8.15. Crude oil declined to trade around $124 a barrel in New York, giving up earlier gains driven by concern renewed violence in Nigeria will cut supply.
Housing Slump
Futures maintained gains after a private report said home prices in 20 U.S. metropolitan areas fell at a faster pace in May, indicating the three-year housing slump has not stabilized. The S&P/Case-Shiller home-price index dropped 15.8 percent from a year earlier, the biggest decline since records began in 2001, after decreasing 15.2 percent in April. The gauge has fallen every month since January 2007.
A separate report may show consumer confidence declined in July to a 16-year low. The Conference Board's measure of consumer confidence probably sank to 50.1 this month from 50.4 in June, according to a survey of economists.
The S&P 500 has declined 21 percent from an October record as the collapse of the U.S. subprime mortgage market forced financial institutions worldwide to report $468 billion in writedowns and credit losses since the beginning of 2007. That prompted economists to forecast 1.5 percent growth in the U.S. economy in 2008, the slowest since 2001. Equities also suffered as inflation increased, giving the U.S. consumer price index the steepest gain since 1991.
The second quarter is poised to mark the fourth straight quarter of declining profits for S&P 500 companies. Earnings have decreased 91 percent at financial firms, 36 percent at companies that depend on discretionary consumer spending and an average 1.6 percent at commodities producers.
Indexes of all 10 industry groups in the S&P 500 have fallen this year, led by a 32 percent tumble in financial shares. Commodities companies have fared the best, dropping 7.2 percent.
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
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