U.S. Stock-Index Futures Rise on Rate-Cut Speculation; GE Gains

By Adria Cimino and Whitney Kisling

Dec. 16 (Bloomberg) -- U.S. stock-index futures advanced on speculation the Federal Reserve will cut its main interest rate to a record low and channel credit to businesses and consumers to halt the worst recession in a quarter century.

General Electric Co., the world’s biggest maker of power- generation equipment, climbed 2.1 percent and Microsoft Corp., the largest software company, added 1.3 percent as traders bet the Fed will cut its benchmark rate to as low as 0.25 percent. General Motors Corp. rose on optimism the Treasury may adopt a plan to save the car industry, while Goldman Sachs Group Inc. gained 1.9 percent even after posting a wider-than-estimated fourth-quarter loss.

Standard & Poor’s 500 Index futures expiring in March added 1 percent to 880.6 at 9 a.m. in New York. Dow Jones Industrial Average futures gained 61 points, or 0.7 percent, to 8,642 and Nasdaq 100 Index futures increased 0.7 percent to 1,203.5.

The Fed’s Open Market Committee will announce its decision on interest rates and monetary policy at around 2:15 p.m. in Washington. The announcement comes after the first simultaneous recessions in the U.S., Europe and Japan since World War II dragged the S&P 500 down almost 45 percent from its 2007 record.

“There won’t be a negative surprise,” said Jacques Porta, a fund manager at Ofi Patrimoine in Paris, which oversees $615 million. “What will be interesting and very important is the discourse. Bernanke has given signals that he will innovate in terms of monetary policy since there isn’t much room left for further rate cuts.”

U.S. stocks fell yesterday, wiping out last week’s gains, after manufacturing showed a worsening economy that analysts said will hurt earnings.

Consumer Prices Slide

The cost of living in the U.S. fell in November by 1.7 percent, the most since record-keeping began in 1947, the Labor Department said. Excluding food and energy, so-called core prices were unchanged from a month earlier.

GE climbed 2.1 percent, while Microsoft added 25 cents to $19.29.

GM, the biggest U.S. automaker, added 2.7 percent to $4.19. The Treasury may adopt a plan that would let a car czar or the Treasury Secretary force GM and Chrysler LLC into bankruptcy if the automakers don’t show they can survive without government aid, a U.S. senator said.

GM and Chrysler would be required to submit viability plans by March 31 or lose any further U.S. support, Carl Levin, a Democrat from Michigan, told reporters in Detroit. The Treasury plan would resemble a measure passed by the U.S. House last week that was rejected by the Senate.

Goldman’s First Loss

Goldman added $1.94 to $68.40. The loss of $4.97 a share in the three months ended Nov. 28 was the company’s first quarterly deficit since going public in 1999. It compared with net income of $3.22 billion, or $7.01, in the same period a year earlier, the New York-based company said. The average estimate of 18 analysts surveyed by Bloomberg was for a loss of $3.73 per share.

Some fertilizer companies rallied after the shares were upgraded to “buy” at Merrill Lynch & Co., which said “fundamentals are nearing a bottom.”

Potash Corp. of Saskatchewan Inc., the world’s largest crop-nutrient producer, rallied 4.5 percent to $72.35. Mosaic Co., the world’s largest producer of phosphates, gained 5.1 percent to $33.06, while Terra Industries Inc., the biggest U.S. maker of liquid-nitrogen fertilizer, added 7.5 percent to $15.83. Intrepid Potash Inc., the largest producer of the crop nutrient in the U.S., rose 8.5 percent to $20.25.

Best Buy Forecast

Best Buy Co. climbed 9 percent to $25.59 after affirming its full-year earnings forecast and reporting third-quarter profit, excluding some items, of 35 cents a share, beating the average analyst estimate by 49 percent. The U.S. consumer electronics chain also said it’s offering voluntary severance packages to almost all workers as part of a “significant” cost-cutting plan.

Exxon Mobil Corp., the world’s biggest publicly traded oil company, advanced 40 cents to $80.35. Crude oil rose, erasing earlier losses, after Venezuela’s oil minister said OPEC will reduce production by at least 1 million barrels a day in an effort to stem the 70 percent plunge in prices from July’s record.

Gilead Sciences Inc., the leading maker of AIDS treatments, climbed 2 percent to $45.27. Merrill Lynch & Co. raised its recommendation on the stock to “buy” from “neutral.”

The S&P 500 is poised for its worst year since the Great Depression after losses and writedowns at the biggest global financial companies reached almost $1 trillion and earnings at U.S. companies dropped for five straight quarters, matching the longest streak on record.

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.