By Adria Cimino
April 8 (Bloomberg) -- U.S. stock futures fell, indicating the Standard & Poor’s 500 Index may drop for a third day, after Alcoa Inc. reported a wider-than-estimated loss. Stocks in Europe and Asia also declined.
Alcoa sank 3.5 percent as the biggest U.S. aluminum producer capped its first back-to-back quarterly losses since the three months ended in March 1994. Mosaic Co. tumbled 6.8 percent on lower earnings. ConocoPhillips, the second-largest U.S. refiner, slipped 1.5 percent after UBS AG cut its recommendation on the shares and crude dropped for a fourth day.
Futures on the S&P 500 expiring in June decreased 0.6 percent to 809.40 at 11:46 a.m. in London. Dow Jones Industrial Average futures slid 0.7 percent to 7,706 and the Nasdaq-100 Index contract fell 0.2 percent to 1,278. Futures pared losses after Pulte Homes Inc. agreed to buy Centex Corp. in a stock deal valued at $1.3 billion.
“Alcoa’s results and discourse weren’t good, and the company is an advance indicator of the economy,” said Chicuong Dang, an analyst at KBL Richelieu Gestion in Paris, which oversees about $2.2 billion. “As we enter the earnings season, we’re coming back to reality. It’s best to remain cautious on stocks.”
U.S. stocks slid yesterday after investors from George Soros to Marc Faber predicted the rebound in equities will falter as the market braces for a seventh straight quarter of dropping earnings.
Alcoa Loss
Profits at S&P 500 companies probably fell 37 percent on average in the first quarter, according to analysts’ estimates compiled by Bloomberg. The stretch of seven straight declines in earnings is the longest since at least the Great Depression, data compiled by S&P and Bloomberg show.
U.S. earnings may drop 31 percent in the second quarter and 18 percent in the next before gaining 76 percent in the last three months of the year, analysts predict. Banks are projected to account for all of the rebound in the final three months of the year. Without financial companies, the gain turns into a 4.5 percent decline, the data show.
Europe’s Dow Jones Stoxx 600 Index fell 0.7 percent as a report showed the U.K. economy shrank 1.5 percent in the first quarter. The MSCI Asia Pacific Index sank 2.2 percent.
Alcoa, the first company in the Dow average to announce results, slid 3.5 percent to $7.52 in New York. The company reported a $497 million net loss in the first quarter. Excluding some items, the loss was 59 cents a share, trailing the average estimate of 14 analysts for a loss of 56 cents.
Mosaic Earnings
Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, fell 0.7 percent to $41.03 in Germany. Peabody Energy Corp., the largest U.S. coal producer, lost 1.4 percent to $26.
Mosaic tumbled 6.8 percent to $40.05 in New York. North America’s second-biggest fertilizer maker posted an 89 percent decline in fiscal third-quarter profit as farmers delayed purchases of phosphate and potash crop nutrients.
The S&P 500 and the Dow average have surged at least 19 percent since reaching the lowest levels in a dozen years on March 9 as banks from Citigroup Inc. to JPMorgan Chase & Co. said they made money in the first two months of the year and Treasury Secretary Timothy Geithner unveiled plans to rid financial firms of toxic assets.
The rally in global stocks over the past month is a “dead cat bounce,” as companies report “terrible” earnings this year and the recession persists, Aberdeen Asset Management Plc’s Hugh Young said in a Bloomberg Television interview.
Liquidating Problem Banks
Nouriel Roubini, the New York University professor who predicted the economic crisis, told Canada’s Business News Network yesterday he sees no reason to change his forecast that the U.S. economy will continue to contract through this year.
A congressional panel overseeing the U.S. financial rescue suggested that getting rid of top executives and liquidating problem banks may be a better way to solve the economic crisis.
The Congressional Oversight Panel, in a report released yesterday, also said the Treasury may be relying on too rosy an economic scenario to guide its $700 billion bailout, and declared that the success of the program after six months is “mixed.” Three of the group’s members disagreed with at least some of the findings.
ConocoPhillips slipped 1.5 percent to $39.10 in German trading. The company is unlikely to increase oil and natural gas production over the next five years, according to UBS analysts, who downgraded the stock to “neutral” from “buy.”
Crude oil fell for a fourth day on speculation a government report today will show U.S. supplies increased as the recession curbed fuel demand.
Centex jumped 16 percent to $8.81 in New York, while Pulte shares were yet to trade. Based on the closing price of Pulte stock on April 7, 2009, the transaction has a value of $10.50 per Centex share, representing a premium of 32.6 percent to the 20-day volume weighted average trading price of Centex’s shares.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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