By Adam Haigh and Elizabeth Stanton
Feb. 4 (Bloomberg) -- U.S. stock-index futures advanced as speculation President Barack Obama’s guarantee for illiquid bank assets will shore up the economy overshadowed lower-than- estimated earnings from Kraft Foods Inc. and Walt Disney Co.
Bank of America Corp., the biggest U.S. lender by assets, and Citigroup Inc. advanced more than 1 percent in pre-market trading in New York. Kraft, the world’s second-largest food company, fell 10 percent after lowering its 2009 profit forecast. Disney, the second-biggest U.S. media company, slid 7 percent after sales and profit fell short of analyst estimates.
Futures on the Standard & Poor’s 500 Index expiring in March added 0.4 percent to 835.2 at 9:03 a.m. in New York. Dow Jones Industrial Average futures climbed 18 points, or 0.2 percent, to 8,004. Nasdaq-100 Index futures advanced 0.3 percent to 1,211.5.
“One more bear-market rally is coming up and it will be that Obama bank plan that will drive it,” said Philippe Gijsels, a Brussels-based senior structured-product strategist at Fortis Global Markets. “Next week we will be through most of the earnings season so that bad news will be out of the way and we will look forward to better news flow,” he said in a Bloomberg Television interview.
The S&P 500 has dropped 7.2 percent this year as companies from Microsoft Corp. to SanDisk Corp. and Motorola Inc. reported disappointing earnings and the economy shrank at the fastest pace in 26 years. The gauge is still 11 percent above an 11-year low reached on Nov. 20 amid optimism Obama’s stimulus package with spur growth.
Earnings Slump
Profits decreased 37 percent on average for the 261 companies in the index that have released fourth-quarter results since Jan. 12. The period is projected to be the sixth straight quarter of decreasing profits, the longest streak on record.
Futures remained higher even after an industry report showed U.S. companies cut 522,000 people from payrolls in January, the 12th straight month of private-sector job loss. The number was lower than the average economist estimate and followed a revised cut of 659,000 in December that was the biggest in seven years of data gathered by ADP employer services.
Labor Department data to be released on Feb. 6 is forecast to show economy-wide job losses of 540,000, adding to almost 2.6 million jobs lost last year.
Toxic Securities
Citigroup added 5 cents to $3.51. Bank of America climbed 10 cents to $5.40.
Treasury Secretary Timothy Geithner is skeptical of setting up a so-called bad bank to hold toxic securities, though the option may still form part of a final rescue program for financial companies, people familiar with the matter said. Senator Charles Schumer yesterday said debt guarantees are becoming “a favorite choice” of options because a bad bank would be too costly.
Kraft lost $2.89 to $25.85. The maker of Nabisco cookies, Oscar Mayer lunchmeats and Maxwell House coffee forecast 2009 earnings per share of $1.88, compared with its previous forecast of at least $2.
Disney dropped $1.44 to $19.18 as first-quarter sales and profit missed analysts’ estimates on shrinking sales at television networks, theme parks and the film studio.
Costco Wholesale Corp., the biggest U.S. warehouse-club chain, slid 7.4 percent to $42.69 after saying earnings per share for the fiscal second quarter will be “substantially below” analysts’ estimates.
Time Warner
Time Warner Inc., the owner of AOL and People magazine, retreated 3.5 percent after reporting a $16 billion loss, its first in 14 quarters. The company lost $4.47 a share in the fourth quarter because of plunging advertising sales and a writedown tied to the value of assets.
Electronic Arts Inc. gained 3.7 percent to $16.07 as the world’s second-largest video game maker slashed costs. The company eliminated 1,100 jobs as it forecast fiscal 2010 profit of $1 a share, 11 percent less than the average analyst estimate.
MetLife Inc. rose 2.7 percent to $29.30. The largest U.S. life insurer reported fourth-quarter profit of 19 cents a share, or 42 percent more than the average analyst estimate.
To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net. Elizabeth Stanton in New York at estanton@bloomberg.net
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