By Adam Haigh - Sep 20, 2011 6:42 PM GMT+0700
Sept. 20 (Bloomberg) -- Nick Nelson, a strategist at UBS AG, discusses factors influencing equity valuations, including the risk of recession. He speaks with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)
Sept. 20 (Bloomberg) -- Komal Sri-Kumar, chief global strategist at TCW Group Inc., talks about Standard & Poor’s downgrade of Italy’s credit rating, the outlook for the European economy and stocks. Sri-Kumar speaks from Los Angeles with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
U.S. stock futures rose, signaling the market may recoup some of yesterday’s drop, as speculation the Federal Reserve will provide more stimulus for the ailing economy outweighed a downgrade of Italy’s credit rating.
Berkshire Hathaway Inc., JPMorgan Chase & Co. and Oracle Corp. climbed at least 1.1 percent to lead gains among the largest U.S. companies in early New York trading.
Contracts on the Standard & Poor’s 500 Index expiring in December gained 0.6 percent to 1,205.3 as of 7:40 a.m. in New York, after earlier losing as much as 1 percent. Dow Jones Industrial Average futures advanced 71 points, or 0.6 percent, to 11,394.
Equities slumped yesterday, halting a five-day rally for the S&P 500, amid concern Greece will fail to qualify for more financial aid needed to avoid default. The 8.8 percent slide in the gauge since the end of June has left it trading at 12.1 times estimated earnings, near the cheapest level since the bull market began in 2009, according to data compiled by Bloomberg.
“Valuations are pricing in a recession that we don’t think will happen,” Nick Nelson, a London-based equity strategist at UBS AG, said in a Bloomberg Television interview. “Equities do look quite attractive, but it’s hard to see how they rally until you have some relief on the politics and the macro side.”
Fed officials will probably announce a new program for monetary easing tomorrow, according to economists in a Bloomberg News survey.
‘Operation Twist’
The Federal Open Market Committee will decide to replace short-term Treasuries in its $1.65 trillion portfolio with long- term bonds, according to 71 percent of 42 surveyed economists. The move, known as “Operation Twist,” will probably fail to reduce the 9.1 percent unemployment rate, 61 percent of the economists said.
S&P cut Italy’s credit rating to A from A+ on concern that weakening economic growth and a “fragile” government mean the nation won’t be able to reduce the euro area’s second-largest debt burden.
Builders probably began work on fewer homes in August, highlighting an industry that’s languishing more than two years into the U.S. economic recovery, economists forecast before a Commerce Department report due at 8:30 a.m. in Washington today.
Housing starts fell 2.3 percent to a three-month low 590,000 annual rate, according to the median estimate of 78 economists surveyed by Bloomberg News. Building permits, a proxy for future construction, may have also dropped for a second month.
Carbonite Inc. may move after JPMorgan Chase & Co., which helped run its initial public offering in August, advised buying shares of the computer-services company. Bank of America Corp., William Blair and Oppenheimer & Co. analysts also recommended the shares.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
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