By Daniela Silberstein and Lynn Thomasson
Jan. 8 (Bloomberg) -- U.S. stock futures slid after retailers from Wal-Mart Stores Inc. to Macy’s Inc. reduced earnings forecasts as the recession forced customers to limit holiday spending and sent unemployment claims to a 26-year high.
Wal-Mart Stores Inc., the world’s biggest retailer, tumbled 8.7 percent, while Macy’s, the second-largest U.S. department- store chain, lost 6.6 percent. Sun Microsystems Inc. fell 3.7 percent as Goldman Sachs Group Inc. recommended selling the shares on “deteriorating fundamentals.”
The Standard & Poor’s 500 Index yesterday slid the most since Dec. 1, erasing most of its 2009 gain, as a private report showed employers cut more jobs than estimated in December and companies from Alcoa Inc. to Intel Corp. spurred concern the profit outlook is worsening. The gauge has rebounded more than 20 percent since Nov. 20 on optimism that President-elect Barack Obama will boost the world’s biggest economy with tax cuts and the largest infrastructure investment since the 1950s.
Futures on the S&P 500 expiring in March fell 0.9 percent to 897.5 at 8:54 a.m. in New York. Dow Jones Industrial Average futures declined 1 percent to 8,660. Nasdaq-100 Index futures dropped 0.4 percent to 1,234.5.
“We only just entered the global recession and are now starting to see the impact,” said Markus Baechtold, an equity analyst at Clariden Leu AG in Zurich, which manages the equivalent of $120 billion. “Profit warnings are expected but the question is how strong earnings will retreat. It will be difficult for the market to extend gains in this environment, we’ll see a lot of volatility.”
Jobless Claims
The total number of people receiving unemployment benefits rose to 4.6 million, the most since 1982, the Labor Department said, even as initial jobless claims unexpectedly fell by 24,000 to 467,000 in the week that ended Jan. 3. A report tomorrow will show the U.S. lost jobs for a 12th straight month in December, economists forecast.
The jobless-claims report comes hours before Obama delivers a speech on the economic outlook in a bid to build support for his stimulus plan. In excerpts of the speech he’s scheduled to give today at 11 a.m. New York time in Fairfax, Virginia, Obama says that while the cost of his economic recovery plan will add to a deficit already projected to exceed $1 trillion, he “won’t just throw money at our problems.”
Obama warned that without immediate steps by the government to revive the economy, family incomes will drop, the unemployment rate could reach “double digits” and the U.S. risks losing a “generation of potential and promise.”
The S&P 500 has slumped 38 percent since the start of 2008 amid more than $1 trillion in credit losses and writedowns at financial firms worldwide and the first simultaneous recessions in the U.S., Europe and Japan since World War II.
Retail Outlook
Wal-Mart sank 7 percent to $51.65 in New York. The retailer cut its fourth-quarter earnings forecast and predicted January revenue may be little changed as customers continue to rein in spending.
Limited Brands Inc., the owner of the Victoria’s Secret chain, said today that sales at stores open at least a year fell 10 percent in December and slashed its fourth-quarter profit projection to as little as 55 cents a share from a previous range of 85 cents to $1. Bebe Stores Inc. reduced the low end of its forecast to 5 cents from 12 cents.
Macy’s and Gap Inc. also lowered their earnings forecasts as the weakened economy wiped out consumer spending during the holiday season. Sales at Limited, owner of the Victoria’s Secret chain, fell 10 percent in December, while Macy’s said it would close 11 stores.
Macy’s shares tumbled 6.6 percent to $10.56 in trading before U.S. exchanges opened.
Earnings Slump
S&P 500 retailers will likely say profits slumped 32 percent in the fourth-quarter and 20 percent in the current quarter, according to analysts polled by Bloomberg.
Sun Microsystems sank 3.7 percent to $4.90. The server maker was added to Goldman Sachs’s Americas “sell” list. The brokerage also lowered its share-price projection and 2009 earnings estimate, citing a “more challenging” first half of 2009 ahead.
The recession is forcing the biggest U.S. companies to acknowledge that forecasts made last year were too optimistic and demand for products ranging from computer chips to linens is falling faster than projected. Time Warner Inc. dropped 6.3 percent yesterday after the owner of HBO and AOL said it will report its first annual loss in six years. Intel Corp., the biggest chipmaker, sank 6.1 percent yesterday as sales trailed its forecast.
Concern that global stock losses will deepen remains elevated. The Chicago Board of Option Exchange Volatility Index yesterday had its biggest intraday gain since Dec. 1. The benchmark index for U.S. stock options had lost more than half of its value since Nov. 20 as stocks rose.
Sears Holdings Corp. advanced 2.1 percent to $41.39. The largest U.S. department-store chain said it expects fourth- quarter earnings per share, excluding items, of $2.44 to $3.09, above the consensus estimate of $1.92.
To contact the reporters on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net; Lynn Thomasson in New York at lthomasson@bloomberg.net.
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