U.S. Stock Futures Fluctuate; Citigroup Gains as Freeport Drops

By Daniela Silberstein

June 17 (Bloomberg) -- U.S. stock futures drifted between gains and losses, following the steepest two-day slump in the Standard & Poor’s 500 Index since April.

Citigroup Inc. and JPMorgan Chase & Co. advanced 1.5 percent in Germany as concern eased the Federal Reserve will raise interest rates later this year. Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, dropped with metal prices. President Barack Obama will release his plan to revamp financial market regulation today, while investors will also watch a report that may show the cost of living in the U.S. rose in May.

Futures on the S&P 500 expiring in September slipped 0.1 percent to 906.80 as of 11:10 a.m. in London, after rising as much as 0.5 percent earlier. The index sank 3.6 percent in the past two days. Dow Jones Industrial Average futures fell 0.2 percent to 8,444 and Nasdaq-100 Index futures increased 0.1 percent to 1,445.25. Shares in Asia and Europe declined.

“The fear of an interest-rate raise later this year may have been responsible for” the drop in the last two days, said Claudio Meiger, who manages about $100 million at Basel, Switzerland-based CIC Schweiz AG. “If the Fed can take that fear out of the market we may climb another 10 to 20 percent.”

Fed officials are considering whether to use next week’s policy statement to suppress any speculation they’re prepared to raise interest rates as soon as this year. While policy makers have signaled they accept an increase in longer-term Treasury yields as the economy improves, some are concerned at any premature anticipation of rate rises. Fed staff have examined the Bank of Canada’s public intention of foregoing an increase until 2010, according to a person familiar with the matter, without concluding the statement has proven effective.

Interest-Rate Bets

Traders in fed fund futures see a 5.2 percent chance that the central bank will lift rates to 0.5 percent at its August meeting, compared with a 13 percent probability a week ago.

The S&P 500 has rebounded 35 percent from its 12-year low in March after the government and Fed pledged $12.8 trillion to end the first global recession since World War II. The index trades at about 14.34 times the earnings of its companies, near the seven-month high of 15.2 reached in May and below the 19.9 average over the last decade.

Stocks slid yesterday as Best Buy Co. posted disappointing sales and commodity producers sank on concern the economic recovery is stalling.

Ahead of today’s regulatory announcement expected at 12:50 p.m. in Washington, Obama pledged to make the derivatives market, which he called a system of “enormous risk,” more transparent. He also said it is important for the U.S. to maintain fiscal discipline to ensure investors in China and around the world keep buying U.S. government debt.

Banks Advance

Obama, in an interview with Bloomberg News, voiced confidence the economy would recover soon, while warning that robust growth was needed if the U.S. is to rein in its budget deficit without raising taxes on most Americans.

Citigroup climbed 1.5 percent to $3.30 in Germany. The bank said it settled a lawsuit against three former executives at a Japanese brokerage it acquired in 2007, ending a two-year court battle stemming from an accounting scandal at the firm.

JPMorgan added 1.5 percent to $33.99. JPMorgan Asset Management will set up funds of more than $1 billion to invest in South Korea’s alternative energy industry, making it the first foreign company to participate in the go-green initiative.

Freeport-McMoRan lost 0.9 percent to $51.92. Copper fell for a fourth day in London, the longest losing streak since December, on speculation that prices no longer reflect demand. Newmont Mining Corp., the largest U.S. gold producer, dropped 0.7 percent to $41.58.

Economy Watch

A Labor Department report scheduled for 8:30 a.m. may show consumer prices rose 0.3 percent in May, according to the median estimate in a Bloomberg survey. Core consumer prices, which exclude food and energy, rose 0.1 percent in May after a 0.3 percent gain the prior month, according to the survey. Separate figures at the same time will probably show the U.S. deficit on its current account narrowed to $85 billion in the first quarter, the smallest in almost 10 years, economists estimated.

Star Scientific Inc. tumbled 69 percent to $1.30 in Germany. The company’s patents for reducing carcinogens in cigarettes are invalid, a federal jury said, giving a victory to Reynolds American Inc. Reynolds didn’t trade in Europe.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.