By Daniela Silberstein
Feb. 20 (Bloomberg) -- U.S. stock futures fell, indicating the Standard & Poor’s 500 Index will extend its worst weekly decline in three months, as concern deepened that government efforts won’t prevent the recession from worsening.
JPMorgan Chase & Co. lost 3 percent after Meredith Whitney forecast banks won’t continue to pay their existing dividends. Goodyear Tire & Rubber Co. slipped 6.7 percent as Goldman Sachs Group Inc. recommended selling the shares. Lowe’s Cos., the second-largest U.S. home-improvement retailer, sank 4 percent after reporting earnings that missed estimates.
Futures on the S&P 500 expiring in March decreased 1.7 percent to 766.4 as of 8:42 a.m. in New York. The index has tumbled 5.8 percent this week, the steepest drop since November. Dow Jones Industrial Average futures fell 1.4 percent to 7,355 and Nasdaq-100 Index futures retreated 1.2 percent to 1,156.25.
“Until economic data and earnings get better we won’t see a recovery,” said Gerold Kuehne, who manages a $127 million U.S. equity fund at LLB Asset Management AG in Vaduz, Liechtenstein. “We’ll continue to see a lot of volatility and may test the lows again.”
Stocks dropped yesterday, sending the Dow Jones Industrial Average to a six-year low, as Hewlett-Packard Co. cut its profit forecast and concern about rising credit-card defaults dragged financial shares to the lowest level since 1995.
The S&P 500 has lost 14 percent in 2009, its worst start to a year, as companies from Microsoft Corp. to Procter & Gamble Co. reported disappointing earnings and Treasury Secretary Timothy Geithner failed to convince investors that his plan to rescue banks will work.
‘Disappointment’
“Disappointment over Geithner’s plan is weighing on the market,” said LLB Asset Management’s Kuehne.
Financial companies around the globe have racked up more than $1.1 trillion in credit-related losses and writedowns, while the U.S., Japan and Europe fell into the first simultaneous recessions since World War II.
Earnings dropped 33 percent on average at the 400 companies in the S&P 500 that have reported fourth-quarter results since Jan. 12, according to data compiled by Bloomberg. The period is poised to be the sixth straight quarter of decreasing profits, the longest streak on record.
Stocks in Asia and Europe declined today as results at companies from Anglo American Plc to Bridgestone Corp. indicated the recession is deepening. The MSCI Asia Pacific Index retreated 2.2 percent and the Dow Jones Stoxx 600 Index lost 2.6 percent.
‘Lucky to Break Even’
JPMorgan, the second-largest U.S. bank, slipped 3 percent to $19.98. Whitney, the financial industry analyst who left Oppenheimer & Co. to start her own firm, said she doesn’t expect the banks she covers to continue paying dividends at their current levels.
“Most of the big banks would be lucky to break even or earn a little bit of money this year,” Whitney said in an interview on CNBC Television.
Citigroup Inc., the bank that got a $52 billion government bailout, dropped 10 percent to $2.25. Whitney, who in October 2007 predicted Citigroup would cut its dividend amid writedowns and credit losses, said she would be a seller of the bank at its current level.
Bank of America Corp. tumbled 6.9 percent to $3.66. Chief Executive Officer Kenneth Lewis was subpoenaed by New York Attorney General Andrew Cuomo, who is investigating whether the bank misled investors related to its acquisition of Merrill Lynch & Co., a person familiar with the matter said.
‘Another Leg Down’
Scott Silvestri, a Bank of America spokesman, didn’t immediately return phone and e-mail messages left after regular business hours yesterday.
Goodyear retreated 6.7 percent to $5.72. Goldman Sachs lowered its recommendation for the largest U.S. tiremaker to “sell” from “neutral,” saying “profit expectations still have another leg down.”
Bridgestone, the world’s biggest tiremaker, said net income will probably fall 71 percent to 3 billion yen ($32 million) this year as demand for new cars wanes.
Lowe’s slid 4 percent to $16.30 in early New York trading. The company reported fourth-quarter earnings per share of 11 cents, a penny below the consensus estimate of 12 cents, and forecast first-quarter earnings per share of 23 cents to 27 cents, also missing analysts’ estimates.
WellCare Health Plans Inc. plunged 25 percent to $10.52. The company became the second managed care provider this year ordered by the government to stop enrolling new customers in Medicare- backed drug and medical plans.
Economy Watch
General Motors Corp. slipped 7.5 percent to $1.85. Chrysler LLC may be sending a message to President Barack Obama’s autos task force by saying the “best option” for survival is a merger with the largest U.S. automaker. GM abandoned merger talks in November and said it is focused on its own survival.
The cost of living in the U.S. rose in January for the first time in six months as gasoline stopped sliding and retailers tried to push through start-of-year increases even as sales slumped. The consumer price index rose 0.3 percent, as forecast, after dropping 0.8 percent in December, Labor Department figures showed. Excluding food and fuel, the so-called core rate climbed 0.2 percent, more than anticipated, reflecting gains in autos, clothing, and medical care.
To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.
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