U.S. Stock-Index Futures Fall; Alcoa, Barrick, Citigroup Drop

By Daniela Silberstein

Dec. 7 (Bloomberg) -- U.S. stock-index futures declined on concern a nine month rally in equities has outpaced the prospects for economic growth and as metals prices retreated.

Alcoa Inc., the largest U.S. aluminum producer, and Barrick Gold Corp. dropped in Europe as gold and copper prices fell in London. Citigroup Inc. and Bank of America Corp. slipped more than 1 percent as traders increased bets the Federal Reserve will lift interest rates.

Futures on the Standard & Poor’s 500 Index expiring this month lost 0.4 percent to 1,104 at 10:13 a.m. in London. Dow Jones Industrial Average futures decreased 0.3 percent to 10,366 and Nasdaq-100 Index futures slipped 0.4 percent to 1,784.75. European stocks also declined, while Asian shares rose.

“There is nervousness about the rally we’ve had since March and some people are seeing the end of the flagpole,” said Gerold Kuehne, who manages about $127 million in U.S. equities at LLB Asset Management AG in Vaduz, Liechtenstein. “People will be taking profits after the recent gains.”

Record-low interest rates and about $12 trillion in spending by governments worldwide have spurred a 63 percent rally in the S&P 500 since March 9. The measure is valued at about 22 times its companies’ reported earnings, near the highest since 2002, according to weekly data compiled by Bloomberg.

U.S. stocks advanced last week, lifting the S&P 500 to the biggest gain in three weeks, after the unemployment rate unexpectedly fell, Chinese manufacturing grew at the fastest pace in five years and investors speculated a Middle Eastern debt crisis was averted.

Fed Funds

Futures traders see a 4.4 percent chance that the Fed may lift its benchmark interest rate to 0.5 percent in January. This compares with a 1.8 percent probability a week ago.

Forecasts for the fastest U.S. earnings growth in 15 years are failing to convince options traders that the S&P 500 Index will extend its biggest rally since the 1930s.

S&P 500 options to protect against declines in stocks over the next year cost 22 percent more than one-month contracts, the highest since 1999, data compiled by London-based Barclays Plc and Bloomberg show. The gap shows concern that analyst estimates for record earnings by 2011 may prove exaggerated, endangering an advance since March.

Alcoa lost 0.8 percent to $12.89 and Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, slipped 0.7 percent to $79.29. Copper fell in London from the highest in almost 15 months on speculation demand may flag as inventories rise in London Metal Exchange warehouses. Aluminum, nickel and zinc also slipped.

Gold Declines

Barrick, the world’s biggest gold miner, declined 1.2 percent to $42.18. Newmont Mining Corp., the largest U.S. producer, retreated 1.6 percent to $51.23 as the precious metal dropped.

Citigroup fell 1.4 percent to $4. The bank of which the U.S. government owns 34 percent must start the capital-raising effort needed to pay back $20 billion of bail-out funds within 10 days or wait more than a month, the Financial Times reported, citing unidentified people close to the situation. Unless the company begins the process by Dec. 14 or 15, it will become unfeasible to do so until after fourth-quarter results are announced in mid-January, the newspaper said.

Bank of America, the largest U.S. lender, declined 1.5 percent to $16.04.

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