U.S. Stock-Index Futures Fluctuate Before Reports on Economy

By Adam Haigh

Aug. 27 (Bloomberg) -- U.S. stock-index futures drifted between gains and losses before a report that may show the world’s largest economy shrank at a faster pace in the second quarter than previously estimated.

Citigroup Inc. advanced 1.9 percent as the New York Post reported billionaire hedge fund investor John Paulson bought shares in the bank. Sigma Designs Inc. declined 5.1 percent after the maker of chips for Internet television set-top boxes and Blu-ray video players reported second-quarter profit that was in line with analysts’ estimates.

Futures on the Standard & Poor’s 500 Index expiring in September slipped 0.1 percent to 1,025.3 at 7:11 a.m. in New York, having risen as much as 0.2 percent earlier. Dow Jones Industrial Average futures decreased less than 0.1 percent to 9,517. Nasdaq-100 Index futures dropped 0.2 percent to 1,633.75. Stocks in Europe and Asia declined.

The S&P 500’s 52 percent rally since March 9 left the gauge valued at about 19 times the earnings of its companies, the most expensive level since 2004. About 76 percent of companies in the index that have reported results since June 17 beat the average analyst estimate for second-quarter per-share profits, according to Bloomberg data.

“The key driver for the next leg of the market is confirmation that earnings numbers are improving,” said James Bevan, who helps oversee about $10 billion as chief investment officer of CCLA Investment Management in London. “The earnings numbers that are currently on the table are some 10 to 15 percent shy of where they should be given the scale of the recovery consistent with lead indicators.”

Economy Watch

A decline in the S&P 500 below its 200-month average would probably signal an additional slump of as much as 6.5 percent, according to Chicago-based Technical Analytics Inc. The index, which closed at 1,028.12 yesterday, has traded higher than its 200-day moving average since July 13 and rose 17 percent above it yesterday, the most since April 1999.

U.S. gross domestic product shrank at a 1.5 percent annual rate from April to June compared with the 1 percent drop reported last month, according to the median forecast of 75 economists surveyed by Bloomberg News. The Commerce Department’s GDP data is due at 8:30 a.m. in Washington.

Another report may show claims for unemployment benefits fell for the first time in three weeks and consumer spending, which accounts for 70 percent of the economy, probably slipped last quarter at a 1.3 percent annual pace, a bigger drop than first estimated, according to a Bloomberg survey of economists.

‘Attractive’

Citigroup added 1.9 percent to $4.72 in pre-market New York trading. Paulson has acquired about a 2 percent stake in the New-York based bank, the New York Post reported today, citing unidentified people.

Sigma Designs slid 5.1 percent to $16.24 in Germany. Second-quarter adjusted earnings per share of 28 cents matched the average analyst estimate.

Piper Jaffray Cos. and Greenhill & Co. may be active after Goldman Sachs Group Inc. raised its recommendation for U.S. mid- capitalization brokerages to “attractive” from “neutral,” citing possible growth in merger and acquisitions and new equity issuances in the third quarter of 2009.

Greenhill was upgraded to “neutral” from “sell,” while Goldman Sachs reiterated its “buy” recommendation for Piper Jaffray. The stocks didn’t trade in Europe.

Guess? Inc. will probably move after reporting second- quarter adjusted profit of 64 cents a share, topping the average analyst projection. The stock didn’t trade in Europe.

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