U.S. Stock-Index Futures Retreat on AIG's Loss, Wal-Mart Sales

By Adam Haigh and Elizabeth Stanton

Aug. 7 (Bloomberg) -- U.S. stock futures declined after American International Group Inc. reported a wider-than-estimated loss and Wal-Mart Stores Inc. forecast slower sales growth.

AIG, the world's largest insurer, slumped as housing-related writedowns wiped out profit and spurred concern that financial firms will need to raise more capital. JPMorgan Chase & Co. and Citigroup Inc. also declined. Wal-Mart, the world's biggest retailer, retreated more than 3 percent, while Costco Wholesale Corp. also fell. Futures extended declines after the government reported a bigger-than-forecast increase in jobless claims.

Futures on the Standard & Poor's 500 Index expiring in September slipped 9, or 0.7 percent, to 1,278.7 at 9:15 a.m. in New York. Dow Jones Industrial Average futures lost 94 to 11,537. Nasdaq-100 Index futures slid 10.75 to 1,885.5.

``I don't think the environment is going to lend itself to growing financial sector earnings any time soon,'' David Joy, chief market strategist at RiverSource Investments LLC in Minneapolis, said on Bloomberg Television. ``We think it's a little too early to be moving back into the financials.'' RiverSource manages $160 billion.

The S&P 500 has fallen 12 percent this year as credit losses and asset writedowns at financial firms worldwide approach $500 billion. Last month, the International Monetary Fund stood by its April forecast for about $1 trillion in losses stemming from the U.S. mortgage crisis.

Initial jobless claims increased by 7,000 to 455,000 in the week ended Aug. 2, the most since March 2002, from 448,000 the prior week. The number of continuing claims increased to a four- year high.

Earnings Watch

Second-quarter earnings at S&P 500 companies that released results through yesterday are down 20 percent on average from a year earlier, according to data compiled by Bloomberg. Financial company earnings have retreated 83 percent and profits at consumer discretionary companies have declined 74 percent.

Profits fell from the year-earlier period in each of the past three quarters, the longest stretch of declines since 2002, as the combination of falling home values and record fuel prices slow economic growth.

Stocks in the U.S. rose for a second day yesterday, sending benchmark indexes to a six-week high, as better-than-estimated earnings at Cisco Systems Inc. spurred a rally in technology shares and falling gasoline inventories boosted fuel refiners.

Crude oil, whose 18 percent drop from a record $145.29 a barrel as of yesterday was a balm for stocks, rose for the first time in three days. Oil for September delivery added 2.7 percent to $121.78 after an explosion temporarily closed a pipeline in Turkey.

European shares still climbed today as better-than-estimated earnings from Axa SA and Barclays Plc and a plan to cut costs at Veolia Environnement SA eased concern the economic slowdown will stifle profits. Asian stocks fell.

AIG Slumps

AIG retreated $3.59 to $25.50. Excluding the declines in the value of some investments, AIG's loss was $1.32 billion, or 51 cents a share, missing by $1.28 the average estimate of 19 analysts surveyed by Bloomberg.

The results intensify pressure on Chief Executive Officer Robert Willumstad to turn around AIG, which posted three quarterly losses totaling more than $18 billion. The shares declined 50 percent in New York trading this year before today.

`Dims Growth'

``There is going to be quite a lot more capital raising going on and it is going to become more difficult to do this,'' said David Hart, a senior equity analyst at London-based investment adviser Fat Prophets U.K. Ltd. ``The writedowns are related to the property market where things are going to continue to deteriorate as the lack of credit dims growth.''

JPMorgan, the second-largest U.S. bank by assets, fell 28 cents to $41.11 in Germany, while Citigroup slipped 18 cents to $19.52.

Wal-Mart fell $2.14 to $58.62. Sales at stores open at least a year may increase 1 percent to 2 percent in August, following an increase of 3 percent in July, the Bentonville, Arkansas-based company said.

Sunoco Inc. gained $1.62 to $44.90 in trading after the official close of U.S. exchanges. Profit, excluding gains from an insurance recovery and a tax settlement, was 52 cents a share, more than the 35-cent average estimate of 15 analysts surveyed by Bloomberg. The shares didn't trade in Europe.

Avis Budget Group Inc. may be active. The third-largest U.S. car-rental company reported second-quarter profit of 15 cents a share, more than the 6-cent average estimate of analysts surveyed by Bloomberg. The stock didn't trade in Europe.

The Bank of England today decided to keep interest rates on hold. The European Central Bank is due to announce its decision on borrowing costs today. Economists also forecast rates to maintain rates at the present 4.25 percent level.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net.