U.S. Stock-Index Futures Drop on Retail, Manufacturing Slump

By Lynn Thomasson

Oct. 15 (Bloomberg) -- U.S. stock-index futures declined as retail sales decreased by the most in three years and a gauge of New York manufacturing slid to a record low, raising concern over the depth of the economic slump.

Exxon Mobil Corp., General Electric Co. and Yum! Brands Inc. retreated more than 2.6 percent. Goldman Sachs Group Inc. and Citigroup Inc. lost more than 4 percent after Oppenheimer & Co. analyst Meredith Whitney said she is still ``cautious'' on bank stocks despite the government's plan to spend $250 billion on stakes in financial firms. Benchmark indexes in Europe and Asia fell for the first time in three days.

Standard & Poor's 500 Index futures expiring in December fell 21.9 points, or 2.2 percent, to 980.4 at 9:11 a.m. in New York. Dow Jones Industrial Average futures retreated 182, or 1.9 percent, to 9,180. Nasdaq-100 Index futures lost 14.25, or 1 percent, to 1,351.75.

``The state of the economy is weighing heavily on investors' minds,'' said Lawrence Creatura, a fund manager at Clover Capital Management in Rochester, New York, which oversees $2.7 billion. ``This has so far been largely a Wall Street problem, but it's starting to cross over to Main Street and the data today supports that.''

The S&P 500 has lost 32 percent in 2008 as losses and writedowns from mortgage-related investments at financial firms worldwide topped $636 billion. The S&P 500 is valued at 12.1 times estimated 2008 profit for its companies. When that price- to-earnings ratio sank to 10.9 on Oct. 10, it was the cheapest compared with the multiple using trailing profit since June 1985.

Energy Slump

Exxon Mobil, the biggest oil company, slid $2.21 to $70.25 as crude oil fell as much as $2.58 to $76.05 a barrel in New York.

General Electric, the 106-year old economic bellwether, lost 57 cents to $20.28. Yum! Brands, owner of Pizza Hut and Taco Bell chains, retreated 90 cents to $27.90. Wal-Mart Stores Inc., the world's largest retailer, retreated 1 percent to $53.92.

Citigroup declined 83 cents to $17.79 and Goldman Sachs declined $7.93 to $114.97 after Oppenheimer's Whitney said the capital infusions from the Treasury are ``one large step in the right direction,'' though not a ``panacea.''

``We remain cautious on the banks and believe we are at least several quarters away from stabilizing fundamentals,'' Whitney wrote in a note dated yesterday. ``We believe credit costs will continue to surprise on the upside and revenues will begin to surprise on the downside as companies will be forced to make money off of lower asset bases.''

Dell, EBay

Dell Inc. dropped 32 cents to $13.76. The company was cut to ``neutral'' from overweight by JPMorgan Chase & Co. analyst Mark Moskowitz. Dell gets about 60 percent of revenue from personal computers, which is a ``hurdle to achieving consistent growth,'' he wrote in a report today.

EBay Inc. retreated 2.6 percent to $17.28. The largest Internet auction company was cut to ``underperform'' at Merrill Lynch & Co., which said it doesn't expect ``positive'' third- quarter results or fourth-quarter forecast. EBay reports after the official close of U.S. exchanges today.

Intel Corp. added 18 cents to $16.11. The chipmaker said fourth-quarter sales may rise, signaling that the global financial crisis hasn't halted demand for personal computers.

JPMorgan, Coca-Cola

JPMorgan added 85 cents to $39.86. The largest U.S. bank by market value reported profit of 11 cents a share, beating the 18-cent loss predicted by analysts on average in a Bloomberg survey. The company said it's ``well-positioned'' to handle the current economic environment.

Coca-Cola Co. climbed $2.27 to $46. The world's largest soft-drink maker posted third-quarter per-share profit that exceeded analysts' estimates by 8.1 percent on increased sales outside the U.S.

Genentech Inc., the largest U.S. maker of cancer drugs, climbed $2.63 to $81.75. The company's third-quarter profit rose 6.7 percent as sales of its tumor-fighting medicines beat analysts' estimates.

The S&P 500, the benchmark index for U.S. equities, fell yesterday as a worsening earnings outlook at PepsiCo Inc. and Microsoft Corp. overshadowed the $2 trillion global push to rescue the financial system. The U.S. is in a recession and policy makers' interest-rate stance is aimed at addressing the risks of a deeper downturn, according to San Francisco Federal Reserve President Janet Yellen.

``Policy is appropriately focused, and decisively focused, on attempting to mitigate the dark scenario on the downside risk -- I believe and I hope that we'll be successful,'' Yellen said after a speech late yesterday in Palo Alto, California. Until the economy recovers, ``the Fed will consider it appropriate to keep interest rates relatively low in order to stimulate the economy,'' she said.

`Heavy Toll'

Yellen's remarks yesterday echoed Fed Chairman Ben S. Bernanke, who said a week ago that the credit strains may take ``a heavy toll'' on the economy if left unchecked.

Confidence in the global economy plunged in October after a deepening freeze in financial markets increased the chances of a recession, a survey of Bloomberg users on six continents showed.

The Bloomberg Professional Global Confidence Index fell to 4 from 11.3 in September, the lowest reading since the survey started in November. Sentiment dropped the most in Asia and Europe and was weakest in Japan. The results reflect responses from 3,764 Bloomberg users in more than 100 countries.

Dollar money-market rates fell after the European Central Bank, Bank of England and Swiss National Bank offered lenders unlimited U.S. currency for the first time in a coordinated effort to unlock credit markets. Three-month dollar Libor slid 0.09 point to 4.55 percent.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.