U.S. Stock-Index Futures Decline Before Citigroup, IBM Earnings

By Julie Cruz

Jan. 19 (Bloomberg) -- U.S. stock-index futures retreated before quarterly earnings reports from Citigroup Inc. and International Business Machines Corp., the world’s largest computer-services provider.

Kraft Foods Inc. declined 0.3 percent in early New York trading after agreeing to acquire U.K. candy maker Cadbury Plc. Brink’s Home Security Holdings Inc. surged 32 percent after agreeing to be bought by Tyco International Ltd. Citigroup gained 1.2 percent.

Futures on the Standard & Poor’s 500 Index expiring in March slipped 0.2 percent to 1,130.5 as of 11:58 a.m. in London. Dow Jones Industrial Average futures dropped 0.1 percent to 10,550, and Nasdaq-100 Index futures were little changed at 1,862.75. U.S. markets were closed yesterday for the Martin Luther King Jr. holiday.

European stocks declined today as a report showed investor confidence in Germany, the region’s biggest economy, fell for a fourth month in January. The S&P 500 fell the most in a month on Jan. 15 as JPMorgan Chase & Co. reported a loss in its retail banking unit, consumer confidence trailed forecasts and a stronger dollar weighed on commodity prices.

“The Citigroup earnings release is going to be the interesting publication today because JPMorgan results on Friday were mixed and investors are still questioning the health of the financial and banking sector in the U.S.,” said Jacques Porta, a fund manager at Ofi Patrimoine in Paris, which oversees about $425 million in equities. “Citi earnings should give a direction to the market.”

Citigroup Earnings

Citigroup, the bank whose biggest shareholder is the U.S. government, is scheduled to release fourth-quarter earnings at 8:00 a.m. New York time. The shares jumped 1.2 percent to $3.46 in pre-market New York trading. IBM, which is due to post results after the market close, slipped 0.5 percent to $131.06 in German trading.

Kraft shares slipped 0.3 percent to $29.50 in pre-market trading. Cadbury’s board agreed to an 11.9 billion-pound ($19.7 billion) takeover offer from Kraft after the U.S. company raised its bid, ending more than four months of resistance.

Brink’s Home Security surged 32 percent to $41.59 in early New York trading after agreeing to be bought by Tyco in a $2 billion transaction. Tyco gained 1.2 percent to $38.

The S&P 500 has risen 1.9 percent so far this year. The index has surged 68 percent since March 9 amid record-low interest rates and about $12 trillion committed by governments worldwide to stimulate the economy.

Upside Surprise

U.S. shares may surprise on the upside this year after lagging behind 2009’s worldwide stock rally, said Garry Evans, head of global equity strategy at HSBC Holdings Plc.

“People have got very high expectations for Asia already,” Evans said on Bloomberg Television. “Contrast that to the U.S. where everyone is so bearish, it can only surprise on the upside.” HSBC has an “overweight” rating for U.S. equities and “underweight” on Asia excluding Japan.

U.S. companies are producing more cash than ever, making the S&P 500 cheaper than any time since credit markets froze just as investors say profits don’t justify higher prices. While the 68 percent rally since March drove price-earnings ratios to the highest level since 2002, when measured by cash flow the index is 37 percent below the 12-year average and half its valuation of 2007, data compiled by Bloomberg show.

A report due at 6:00 p.m. New York time may show builders became less pessimistic this month. The National Association of Home Builders/Wells Fargo confidence index probably climbed to 17 from a six-month low of 16 in December, according to the median estimate of 39 economists surveyed by Bloomberg. It would be the first gain in four months. Readings less than 50 signal that most respondents view conditions as poor.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net