U.S. Stock-Index Futures Drop; Ford, McDonald's Shares Fall

By Michael Patterson and Lynn Thomasson

July 24 (Bloomberg) -- U.S. stock-index futures declined as worse-than-estimated results from Ford Motor Co. and Dow Chemical Co. overshadowed growing confidence lawmakers will pass a bill to shore up the mortgage industry.

Ford, the world's third-largest automaker, dropped after reporting a loss twice as big as analysts estimated. Dow Chemical retreated as surging raw-materials costs dragged down earnings 27 percent. McDonald's Corp., the biggest restaurant company, fell after Deutsche Bank AG cut its recommendation on the shares. Fannie Mae and Freddie Mac climbed following the approval of legislation from the House of Representatives to bolster the mortgage-finance companies.

``You are starting to see a lot of the problems in the financial area drifting over into more of the real economy,'' Tobias Levkovich, the chief U.S. equity strategist at Citigroup Inc. in New York, said in an interview on Bloomberg Television. ``We're going to settle a little bit'' after the rally in stocks over the past week, he said.

Futures on the Standard & Poor's 500 Index expiring in September lost 3.2 points, or 0.3 percent, to 1,279.2 at 8:44 a.m. in New York as a higher-than-forecast increase in jobless claims also weighed on stocks. Dow Jones Industrial Average futures slipped 28 to 11,585. Nasdaq-100 Index futures added 6 to 1,855 after income at Amazon.com Inc. doubled. European shares dropped as German business confidence sank, while Asian shares advanced.

Advance Pared

Futures indicated the S&P 500 may pare a 5.5 percent rebound from an almost three-year low on July 15. Companies outside the financial industry have posted second-quarter earnings that topped analysts' estimates by an average of 3.1 percent, according to data compiled by Bloomberg. The measure is still 18 percent below its October record.

The S&P 500's rally in the past week was led by bank shares after lenders including JPMorgan Chase & Co. and Citigroup Inc. posted better-than-estimated results and lawmakers moved closer to approving a rescue plan for Fannie Mae and Freddie Mac.

The 28 percent jump in the S&P 500 Financials Index during the five trading days ended July 22 was the biggest one-week advance for any of the S&P 500's 10 industry groups since daily calculations on the indexes began in 1989, according to Harrison, New York-based research firm Bespoke Investment Group LLC.

An almost 16 percent retreat in oil from its July 11 record helped fuel gains in consumer, industrial and technology shares.

Ford dropped 4.6 percent to $5.75. Excluding costs the company considers one-time expenses, the loss was $1.38 billion, or 62 cents a share. On that basis, Ford was expected to report a loss of 28 cents a share, the average estimate of 12 analysts surveyed by Bloomberg.

Dow Chemical, McDonald's

Dow Chemical slipped 0.5 percent to $34.08. Net income dropped to 81 cents a share from $1.07 a year earlier as energy and raw-materials costs surged. Profit was expected to be 85 cents a share, the average estimate of 15 analysts in a Bloomberg survey.

McDonald's, the biggest restaurant company, lost 26 cents to $59.40. Deutsche Bank analysts led by Jason West cut their recommendation on the shares to ``hold'' from ``buy,'' writing that higher beef costs and fewer customer visits may reduce profitability.

Fannie Mae gained 6.7 percent to $16 and Freddie Mac added 6.2 percent to $11.47. House members voted 272-152 in favor of the measure that gives Treasury Secretary Henry Paulson power to inject capital into Fannie Mae and Freddie Mac and provides for a federal agency to insure refinanced home loans.

Amazon.com

Amazon.com added 8 percent to $76.17. Second-quarter profit topped analysts' estimates after Chief Executive Officer Jeff Bezos promoted free shipping and lower prices to entice U.S. customers. Full-year sales may rise to as much as $20.1 billion, compared with an earlier forecast of as much as $20 billion, the company said.

Sales of previously owned U.S. homes probably fell in June, approaching a record low and signaling tumbling real-estate values and consumer confidence are hurting demand, economists said ahead of a private report today. Resales dropped 1 percent to a 4.94 million annual rate last month, according to the median forecast of 77 economists surveyed by Bloomberg News. The report is due at 10 a.m. New York time.

U.S. equity index futures also declined after a government report showed the number of Americans filing first-time claims for unemployment benefits rose last week to the highest in almost four months, a sign the slowing economy is weakening the labor market. Initial jobless claims increased by 34,000 to 406,000 in the week ended July 19 and exceeded the average estimate predicted by economists in a Bloomberg survey.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Lynn Thomasson in New York at lthomasson@bloomberg.net.