U.S. Stock-Index Futures Decline on Europe

By Adria Cimino - Nov 15, 2011 6:28 PM GMT+0700

U.S. stock futures declined as concern that European leaders are still struggling to manage the debt crisis overshadowed reports that may show retail sales and manufacturing improved in the world’s largest economy.

Kellogg Co. (K), the maker of Corn Flakes cereal and Keebler cookies, fell in Germany after Sanford C. Bernstein & Co. cut its recommendation on the stock. Geron Corp. (GERN) tumbled 17 percent after saying it is ending stem-cell therapy research to focus on cancer drugs.

Standard & Poor’s 500 Index futures expiring in December fell 1.1 percent to 1,238.3 at 6:10 a.m. in New York, as Italy’s benchmark borrowing costs soared above 7 percent. Dow Jones Industrial Average futures retreated 111 points, or 0.9 percent, to 11,949.

“Earnings are behind us and now we come back to the problem of instability in Europe,” said Virginie Robert, Paris- based managing director at Raymond James Asset Management International, which oversees about $30 billion. “Borrowing costs aren’t where they should be and that is hurting the market. U.S. economic numbers will be closely watched.”

Stocks rose last week, restoring the year-to-date gain for the S&P 500, as improving economic data and new leaders for Greece and Italy bolstered investor optimism. Shares fell yesterday as Italian borrowing costs rose.

Monti’s Priorities

Mario Monti, Italy’s prime minister-designate, struggled to get political parties to agree to join his Cabinet during talks in Rome yesterday. A government lacking political representation will find it harder to muster support from the parties in parliament to pass unpopular laws. Monti said he’ll wrap up his talks today.

The euro area’s inability to contain its sovereign-debt crisis led to a surge in Italian borrowing costs as investors bet on which nation may need aid next. Monti will try to reassure investors that Italy can cut its 1.9 trillion-euro ($2.6 trillion) debt and spur economic growth that has lagged behind the euro-region average for more than a decade.

In the U.S., retail sales probably rose in October as demand for automobiles improved, giving the world’s largest economy a boost entering the final quarter of 2011, economists said before a report today. The 0.3 percent gain would follow a 1.1 percent September increase, according to the median forecast of 78 economists surveyed by Bloomberg News.

Wholesale prices fell and an index of New York-area manufacturing improved, other reports may show.

Producer Prices

The Labor Department may report the producer price index fell 0.1 percent last month after advancing 0.8 percent in September, according to the survey median. A report from the Federal Reserve Bank of New York may show the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut, rose to minus 2 in November from minus 8.5 last month, according to the Bloomberg survey median.

MSCI Inc. plans to announce the results of its semi-annual index review at 5 p.m. New York time today. Investors and funds that track indexes may buy or sell stocks depending on their inclusion in gauges.

Kellogg dropped 1.3 percent to $49 in Germany. Bernstein cut its recommendation on the shares to “market perform” from “outperform.”

Geron lost 17 percent to $1.83 in German trading. The company that was conducting the first U.S.-authorized trial of human embryonic stem cells is ending the program to focus on its cancer drugs. The Menlo Park, California-based company will eliminate 66 full-time jobs.

Amgen Inc. (AMGN), the world’s largest biotechnology firm, fell 1.7 percent to $56.38 in Germany. The stock was cut to “neutral” from “overweight” at Piper Jaffray Cos.

Home Depot Inc. (HD), the world’s largest home-improvement retailer, climbed 2 percent to $39 in early New York trading after raising its fiscal-year forecast. The company projected annual earnings per share of $2.38, compared with an earlier guidance of $2.34. Home Depot increased its quarterly dividend by 16 percent.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net.