U.S. Stock Futures Decline on German Comments

U.S. stock futures declined, as a German government spokesman damped expectations for a swift resolution to Europe’s debt crisis and a report showed New York- area manufacturing shrank more than forecast.

Wells Fargo & Co. (WFC), the largest U.S. home lender, lost 3.8 percent after profit matched analysts’ estimates. Citigroup Inc. (C), the third-biggest U.S. bank, rallied 1.4 percent as profit rose 74 percent, beating projections. El Paso Corp. (EP) surged 29 percent as Kinder Morgan Inc. agreed to buy the company for $21.1 billion in cash and stock.

Standard & Poor’s 500 Index futures expiring in December slipped 0.3 percent to 1,216 at 8:44 a.m. New York time, following the biggest weekly gain for the gauge since 2009. Dow Jones Industrial Average futures dropped 28 points, or 0.2 percent, to 11,538 today.

The S&P 500 rose 6 percent last week amid optimism over corporate earnings and steps by European leaders to support the region’s banks. It has surged 11 percent from Oct. 3, its lowest close in more than a year, through Oct. 14. The rebound brought the gauge close to the top of a price range between 1,074.77 and 1,230.71, where it’s traded for more than two months.

Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit. Group of 20 finance ministers and central bankers concluded weekend talks in Paris endorsing parts of an emerging plan to avoid a Greek default, bolster banks and curb contagion.

Search for End

German Chancellor Angela Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” Steffen Seibert, Merkel’s chief spokesman, said at a briefing in Berlin today. The search for an end to the crisis “surely extends well into next year.”

U.S. equity futures fell after the Federal Reserve Bank of New York’s general economic index rose in October to minus 8.5 from minus 8.8 in September. Economists projected an improvement to minus 4, based on a Bloomberg News survey. Readings less than zero signal companies in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut, are cutting back.

Industrial production in the U.S. probably advanced in September for a fifth consecutive month, a sign manufacturers are contributing to growth, economists said before reports today. Production at factories, mines and utilities increased 0.2 percent, the same as in August, according to the median forecast of 67 economists surveyed by Bloomberg News.

Wells Fargo Slumps

Wells Fargo dropped 3.8 percent to $25.66. Net income climbed to a record $4.06 billion, or 72 cents a diluted share, from $3.34 billion, or 60 cents, in the same period a year earlier, the San Francisco-based company said today in a statement. The average estimate of 30 analysts surveyed by Bloomberg was for earnings per share of 72 cents.

Citigroup rallied 1.4 percent to $28.80. The bank’s credit- valuation adjustment, or CVA, mirrored a similar $1.9 billion gain posted by JPMorgan Chase & Co. (JPM) last week. The benefit helped Citigroup Chief Executive Officer Vikram Pandit, 54, weather a quarter in which its shares tumbled 38 percent amid concern revenue from trading and investment-banking would drop because of Europe’s debt crisis and the U.S. debt-ceiling fight.

El Paso surged 29 percent to $25.28. The cash and stock offer is valued at $26.87 per El Paso share, or 37 percent more than the Oct. 14 closing price, Houston-based Kinder Morgan said in a statement yesterday. The combined company would have 67,000 miles (107,000 kilometers) of gas lines and eclipse Enterprise Products Partners LP as the biggest U.S. pipeline operator.

Best Is Over

Stock market bulls and bears agree on at least one thing. The highest valuations for makers of household goods since 2008 signal the best is over after the industry rose more than any other group this year.

Supermarket operators, food producers and soapmakers in the MSCI World (MXWO) Index gained 3.1 percent in 2011 through Oct. 14 as the gauge for developed-market stocks lost 7.3 percent on concern the global economy is slowing. Japan Tobacco Inc., the seller of Mild Seven cigarettes, trades 12 percent above its price-earnings multiple from the past five years. Hershey Co. (HSY)’s 27 percent rally pushed the chocolate maker to the biggest premium to profits since 2008, data compiled by Bloomberg show.

Bears say the easy money has been made in so-called defensive shares should the world slip into a recession. Bulls favor companies with faster earnings growth and cheaper valuations. The last time household-goods producers were this expensive versus the MSCI World, stocks were about to begin an advance in which bank, mining and industrial stocks jumped more than 137 percent, while consumer staples rose 76 percent.

“You’ve got too much money that has been bet that we’re going into a recession,” said Jeffrey Saut, who helps oversee $300 billion as chief investment strategist at Raymond James & Associates in St. Petersburg, Florida. “If we don’t go into a recession, you’ll get a whole rotation out of these highly valued defensive stocks into more aggressive stocks.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net