U.S. Stock Futures Drop; Chevron, Freeport Fall With Oil, Metal

By Sarah Jones and Jeff Kearns

June 15 (Bloomberg) -- U.S. stock futures fell, signaling the Standard & Poor’s 500 Index may drop from a seven-month high, as lower oil and metal prices weighed on commodity producers and manufacturing in the New York region contracted at a faster pace.

Chevron Corp. lost 1.3 percent as crude declined for a second day. Freeport-McMoRan Copper & Gold Inc. slid 2.9 percent as copper decreased by the daily limit in Shanghai on speculation supply may outpace demand in China, the largest consumer. Wal-Mart Stores Inc. sank 1.7 percent after Goldman Sachs Group Inc. downgraded the shares.

Futures on the S&P 500 expiring in September decreased 1.2 percent to 929.7 at 9:08 a.m. New York time, after the benchmark index climbed 40 percent from a 12-year low March 9. Dow Jones Industrial Average futures lost 1.2 percent to 8,635 and Nasdaq- 100 Index futures fell 1 percent to 1,470.75. Stocks also retreated in Europe and Asia.

“There’s no clear trajectory for moving us out of a recessionary environment,” said Wayne Wicker, who oversees $33 billion as chief investment officer at Vantagepoint Funds in Washington. “Given the shellshock of the last year and a half, you have a lot of people who don’t think this market is sustainable.”

Futures extended declines after the Federal Reserve Bank of New York said its June general economic index fell to minus 9.4 from minus 4.6 the prior month. Readings below zero for the Empire State index signal manufacturing activity is shrinking.

Valuation Watch

The S&P 500’s rally since March left the index valued at 14.9 times its companies’ earnings, near the highest level since October. Last week, the Dow average became the latest major U.S. stock gauge to give investors a profit for the year amid growing optimism the worst recession since World War II is ending after the government and Federal Reserve pledged $12.8 trillion to revive economic growth.

Group of Eight finance ministers, who met in Italy over the weekend, have began drawing up contingency plans for rolling back budget deficits and bank bailouts as the economy shows signs of recovery and investors start worrying about inflation.

Russian Finance Minister Alexei Kudrin said the dollar is in “good shape,” further affirming that there’s no substitute for the world’s reserve currency. “It’s too early to speak of an alternative,” Kudrin said in an interview two days ago in Italy after meeting officials from the G-8 nations.

Treasuries Gain

Treasuries climbed for a third day, the longest streak in a month. International holdings of long-term U.S. financial assets, a haven for investors during the global financial crisis, rose at a slower pace in April as China, Japan and Russia trimmed their holdings of Treasuries. Purchases of long- term equities, notes and bonds rose a net $11.2 billion, compared with buying of $55.4 billion in March, the Treasury said today in Washington.

Chevron, the second-biggest U.S. oil company, lost 1.3 percent to $71.75, while rival ConocoPhillips retreated 1.6 percent to $43.65.

Crude oil for July delivery dropped as much as 1.9 percent to $70.71 a barrel in electronic trading on the New York Mercantile Exchange as the dollar rose the most in a week against the euro, limiting investors’ need to use commodities as a hedge against inflation.

Freeport-McMoRan, the world’s biggest publicly traded copper producer, slid 2.9 percent to $56.84 as gold declined to a three-week low.

Inventories of copper in Shanghai warehouses grew for a second week to 60,647 metric tons last week, the highest since the week of March 20, 2008, the exchange said after the market closed June 12. China’s imports of the metal and its products increased 6 percent in May from April to 422,666 tons.

Wal-Mart lost 1.4 percent to $49.16 after Goldman cut the largest retailer to “neutral” from “buy,” saying it sees “little near-term positive catalysts to drive shares higher.”

To contact the reporters on this story: Sarah Jones in London at sjones35@bloomberg.net. Jeff Kearns in New York at jkearns3@bloomberg.net.