U.S. Stock Futures Drop as Job Cuts Top Economists’ Forecasts

By Elizabeth Stanton

Dec. 5 (Bloomberg) -- U.S. stock futures tumbled after employers cut jobs at the fastest pace in 34 years last month, spurring concern that the deepening recession will prolong a 15- month slump in corporate profits.

JPMorgan Chase & Co., American Express Co. and Microsoft Corp. led declines in Dow Jones Industrial Average stocks trading in Europe after the government said the nation lost 533,000 jobs last month, 59 percent more than the average estimate in a Bloomberg survey of economists. Benchmark indexes were poised to post their fourth weekly drops since October.

Futures on the Standard & Poor’s 500 Index expiring in December slid 1.8 percent to 832.4 at 9:09 a.m. in New York. Dow Jones Industrial Average futures lost 1.4 percent to 8,287 and Nasdaq-100 Index futures fell 1.6 percent to 1,117.25.

“Weakening employment makes the banking environment rougher,” said Matthew DiFilippo, director of research at Stewart Capital Advisors in Indiana, Pennsylvania, which manages $1 billion. “It leads to higher levels of nonperforming loans, making recovery in the banking sector more challenging. I wouldn’t be surprised if we retest the lows because of today’s number.”

The S&P 500 is down 42 percent in 2008, poised for its worst year since 1931, after the collapse of the subprime mortgage market dragged the nation into a recession and reduced average profits for five consecutive quarters. The benchmark index is still 12 percent above its 11-year low on Nov. 20 amid speculation the Federal Reserve will cut interest rates and Congress will pass another stimulus package to cushion the economy from the global financial crisis.

Weekly Slide

The S&P 500 has dropped 5.7 percent this week and the Dow average has retreated 5.1 percent. The Nasdaq Composite Index has declined 5.9 percent.

JPMorgan retreated 3.7 percent to $29.92 in trading before the open of U.S. exchanges. Microsoft, the world’s largest software company, slipped 2.2 percent to $18.69. American Express Co. declined 2.4 percent to $20.35.

General Motors Corp. added 5.8 percent to $4.35. Chief Executive Officer Rick Wagoner told lawmakers yesterday he would accept strict conditions for a U.S. loan to stay afloat, including a promise to return the money and file for bankruptcy if his company doesn’t fulfill the terms. GM says it needs $8 billion to keep from running out of cash by early next year.

China and the U.S. pledged $20 billion to fund trade and agreed to deepen financial ties, stepping up efforts to counter the credit crisis in their final economic talks before President-elect Barack Obama takes office.

U.S. Treasury Secretary Henry Paulson said the extra trade finance will be supplied by import-export banks in China and the U.S. The money would be available to “creditworthy importers in developing economies” to finance exports from the U.S. and China and to benefit the global economy, Paulson said. “China is stepping up its efforts to promote global growth and stability.”

The U.S. also agreed to speed up approvals for Chinese financial institutions investing in the country, the nations said in a joint statement as the Strategic Economic Dialogue ended in Beijing today.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.