U.S. Stock-Index Futures Fluctuate; Alcoa Falls, Pfizer Gains

By Adam Haigh

Jan. 12 (Bloomberg) -- U.S. stock futures drifted between gains and losses after the biggest weekly drop since November left the Standard & Poor’s 500 Index valued at the cheapest since 1991, offsetting concern profits may deteriorate further.

Alcoa Inc. declined 3 percent in Germany before its earnings release today as Deutsche Bank AG advised clients to sell the stock. Pfizer Inc. advanced 2.6 percent after Goldman Sachs Group Inc. raised its recommendation to “neutral” from “sell.”

Futures on the S&P 500 expiring in March slipped 0.1 percent to 884.8 at 12:33 p.m. in London. Dow Jones Industrial Average futures lost 0.1 percent to 8,521. Nasdaq-100 Index futures added 0.1 percent to 1,223.50.

“You can never underestimate the market’s ability to discount bad news,” Ben Rogoff, who manages about $3.6 billion at Polar Capital Technology Trust Plc, said in a Bloomberg Television interview. Earnings estimates “for 2009 are still too high. We are stunned by how slow sell-side analysts have been to lower numbers.”

The S&P 500 slumped 4.5 percent last week as companies from Alcoa to Intel Corp. spurred concern the profit outlook is deteriorating, while the unemployment rate in the U.S. climbed to the highest in almost 16 years.

President-elect Barack Obama said in an ABC interview yesterday that reviving the economy will require scaling back on campaign promises and personal sacrifice from all Americans.

Profits for companies in the measure fell 20 percent in the fourth quarter of 2008, according to analysts’ estimates compiled by Bloomberg. Excluding financial institutions, earnings probably declined 18 percent.

Valuations

The S&P 500 is valued at 15.89 times earnings, the lowest since February 1991, Bloomberg data show. The gauge may rise to 1,110 by the end of the year, a gain of 24 percent from the Jan. 9 close as government measures revive the economy and investors move from cash into equities, according to Nomura Holdings Inc. strategist Ian Scott.

The index has rebounded 18 percent since Nov. 20 as investors speculated that Obama will boost the world’s biggest economy with tax cuts and the Federal Reserve has slashed interest rates to as low as zero percent.

Alcoa lost 3 percent to $10.49. The shares slumped 11 percent last week after the company said it will cut 13 percent of its 107,000 employees and reduce capital spending by half. Deutsche Bank downgraded Alcoa to “sell” from “hold” and reduced its price estimate on the shares 20 percent to $8.

Pfizer, Crude Oil

Pfizer, the world’s biggest drugmaker, advanced 2.6 percent to $17.89 in German trading.

Exxon Mobil Corp. declined as crude sank below $40 a barrel in New York. The world’s largest oil company slipped 0.3 percent to $77.30, while Chevron Corp. retreated 0.8 percent to $72.25 in German trading.

Citigroup Inc. and Morgan Stanley will probably be active. Citigroup may book a gain of as much as $10 billion by selling control of its brokerage to Morgan Stanley, helping to replenish capital depleted by the biggest losses in the bank’s history, a person familiar with the talks said.

Citigroup spokesman Michael Hanretta declined to comment. Jim Wiggins, a spokesman for Morgan Stanley, didn’t return calls seeking comment.

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To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net.