U.S. Stock Futures Drop on Earnings Concern; Starbucks Retreats

By Daniela Silberstein and Lynn Thomasson

Nov. 11 (Bloomberg) -- U.S. stock futures pointed to a second day of declines as Starbucks Corp. reported profit that trailed estimates and Credit Suisse Group AG said developed economies are headed for the worst recession since 1945.

Starbucks slid 7.4 percent after the world's biggest chain of coffee shops predicted slowing sales and backed away from expansion plans. Goldman Sachs Group Inc. told clients to sell shares of Prudential Financial Inc., the second-biggest U.S. life insurer, pushing the stock down 3.1 percent. Exxon Mobil Corp. and ConocoPhillips slumped more than 1.7 percent as oil declined.

``The bad news keeps coming,'' said Roger Kunz, head of investment strategy at Clariden Leu AG in Zurich, which manages the equivalent of about $120 billion. ``More and more companies are showing that they have problems and the economic outlook keeps worsening.''

Futures on the Standard & Poor's 500 Index dropped 1.7 percent to 906.2 at 8:15 a.m. in New York. Dow Jones Industrial Average futures retreated 155 points, or 1.7 percent, while Nasdaq-100 Index futures fell 1.6 percent to 1,236.75.

Europe's Dow Jones Stoxx 600 Index lost 2.9 percent and the MSCI Asia Pacific Index declined 3.5 percent. U.K. homebuilder Taylor Wimpey Plc said orders have fallen 40 percent while Citizen Holdings Co., the world's largest watchmaker, cut its profit forecast.

Credit Crisis

Credit Suisse lowered its mid-2009 target for the S&P 500 to 1,050 from 1,200. The U.S. stock benchmark retreated 37 percent this year as concern deepened that the credit crisis sparked by a surge in U.S. mortgage defaults will drag down the global economy.

The S&P 500 dropped yesterday on a worsening profit outlook for companies, including Goldman Sachs and Google Inc. Third- quarter earnings shrank 17 percent for S&P 500 companies that reported results, according to Bloomberg data. Profits for 2008 will decrease an average 8.5 percent and rise 12 percent next year, based on a survey of analysts' estimates.

Starbucks fell 75 cents to $9.45. Excluding costs to close underperforming stores and cut jobs, the company earned 10 cents a share, missing analysts' average estimate by 3 cents.

Prudential slid 95 cents to $30. Goldman Sachs reduced its rating on the life-insurance industry to ``cautious'' from ``neutral'' and advised selling shares of Prudential, Lincoln National Corp., Principal Financial Group Inc. and Hartford Financial Services Group Inc. The companies may need to raise more capital after equity and debt markets fell, and their credit ratings may get cut, Goldman analyst Chris Neczypor wrote.

Exxon Mobil declined 1.7 percent to $72.75. ConocoPhillips slumped 1.8 percent to $50.

Crude oil fell below $60 a barrel in New York amid speculation the International Energy Agency will lower its 2009 demand forecast as slowing economic growth cuts fuel consumption.

AIG, Toll Brothers

American International Group Inc. dropped 8 cents to $2.20. The company, which posted a record third-quarter loss, has led North American insurers to more than $120 billion in debt-market losses, helping to push the tally for the world's biggest financial firms toward the trillion-dollar mark.

Toll Brothers Inc. lost 36 cents to $18.59. The largest U.S. luxury homebuilder reported its 10th straight quarterly revenue decline as home prices plunged and consumer confidence fell. Homebuilding revenue dropped to about $691 million in the fiscal fourth quarter from $1.17 billion a year earlier.

Fannie Mae, Freddie Mac and housing industry officials plan a new mortgage modification program designed to cut payments for hundreds of thousands of homeowners facing foreclosure, according to people briefed on the matter.

American Express

Under the proposal, mortgage servicers will work with borrowers to reduce monthly payments to 38 percent of their income, a level considered a threshold for affordability, using a combination of lower principals, interest-rate reductions and extensions, the people said.

American Express Co. added 1.8 percent to $24.42. The company won U.S. Federal Reserve approval to become a commercial bank, gaining access to government funds as credit-card defaults climb with economies slowing around the world.

The Fed waived a 30-day waiting period on the application because of ``the unusual and exigent circumstances affecting the financial markets,'' according to a Fed statement released yesterday in Washington. Chairman Ben S. Bernanke and his colleagues unanimously approved the plan.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net; Lynn Thomasson in New York at lthomasson@bloomberg.net.