U.S. Stock-Index Futures Fall on Swine Flu Concern; Alcoa Drops

By Adam Haigh

April 27 (Bloomberg) -- U.S. stock-index futures declined and Treasuries gained as the swine flu outbreak spread and Lawrence Summers, director of the White House National Economic Council, said the U.S. economy will keep contracting.

Alcoa Inc. led a drop among raw-material producers, falling 1.9 percent in German trading, as metal prices dropped on concern the economic decline won’t ease anytime soon. General Electric Co. slid 1.7 percent as Summers said unemployment will continue to rise for “quite some time.”

Futures on the Standard & Poor’s 500 Index expiring in June retreated 1.9 percent to 850.1 at 12:13 p.m. in London. Dow Jones Industrial Average futures lost 1.7 percent to 7,917. Nasdaq-100 Index futures declined 1.5 percent to 1,354.25.

“We have seen a setback coming from the swine flu so we move away from fundamentals for the time being,” said Roger Groebli, Singapore-based head of financial market analysis at LGT Capital Management. “The market will be in limbo because of the uncertainty,” he said in a Bloomberg Television interview.

The Standard and Poor’s 500 Index has rallied 28 percent since March 9 as companies from American Express Co. to Ford Motor Co. posted better-than-estimated earnings and investors speculated U.S. Treasury Secretary Timothy Geithner’s plan to finance the purchase of as much as $1 trillion in illiquid assets from banks will help to pull the global economy out of the economic slump.

Earnings

Earnings are expected at companies from Verizon Communications Inc. to Qualcomm Inc. today. Of the 178 S&P 500 companies that have reported earnings since April 7, 120 beat the average analyst estimate and 57 missed, according to Bloomberg data. Profits have declined an average of 32 percent during the period.

Yields on 10-year Treasury notes dropped six basis points to 2.94 percent. The yen strengthened to 127.05 per euro from 128.66 last week. The dollar advanced to $1.3163 per euro, from $1.3242.

Japan, Malaysia and Singapore said they are screening passengers at checkpoints for fever, while Hong Kong raised its swine-flu response level.

The S&P 500 trimmed its weekly decline on April 24 as the Federal Reserve, which released the criteria for its stress test of lenders, said most of the country’s banks hold capital “well in excess” of regulatory standards.

U.S. equities were lowered to “benchmark” from “overweight” by London-based equity strategist at Credit Suisse Group AG, which wrote “the relative performance of the U.S. deteriorates as lead indicators turn up.”

Alcoa

Alcoa, the biggest U.S. aluminum producer, lost 1.9 percent to $8.96 in German trading. Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, slid 1.7 percent to $40.24.

Copper for three-month delivery on the London Metal Exchange dropped as much as 3.7 percent to $4,305 a metric ton.

General Electric, the world’s biggest maker of power-plant turbines and jet engines, slid 1.7 percent to $11.91 in German trading.

The U.S. economy will experience “sharp declines in employment for quite some time this year,” Lawrence Summers said yesterday on “Fox News Sunday.”

Whole Foods Market Inc., the largest natural-food grocer, retreated 3.2 percent to $19.11 in German trading as UBS AG cut its recommendation on the shares to “sell” from “neutral.”

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