By Rita Nazareth - Nov 17, 2011 8:12 PM GMT+0700
U.S. stock futures fell, indicating the Standard & Poor’s 500 Index will decline a second straight day, as an increase in Spanish and French borrowing costs bolstered concern the European debt crisis is worsening.
Citigroup Inc. (C) and Wells Fargo & Co. (WFC) lost at least 1 percent. Freeport-McMoRan Copper & Gold Inc. (FCX) dropped 1.2 percent, pacing declines in commodity producers, after China’s central bank said prices haven’t stabilized enough to loosen monetary policy. Applied Materials Inc. (AMAT), the largest producer of chipmaking equipment, decreased 2.5 percent after forecasting sales and profit that fell short of analysts’ estimates.
S&P 500 futures expiring in December dropped 0.4 percent to 1,226.60 at 8:11 a.m. New York time. The benchmark gauge fell 1.7 percent yesterday. Dow Jones Industrial Average futures declined 30 points, or 0.3 percent, to 11,815 today.
The cost of insuring against default on Spanish and French sovereign debt rose to records after the nations’ borrowing costs increased at bond auctions today. German Chancellor Angela Merkel said that neither joint euro-area bonds nor using the European Central Bank as a lender of last resort offer solutions to the debt crisis at present.
In the U.S., builders probably began work on fewer homes in October, a sign housing will remain a laggard in the third year of the U.S. recovery, economists said before a report today. The Federal Reserve Bank of Philadelphia may report at 10 a.m. that its general economic index was little changed at 9 in November from 8.7 the previous month, according to the Bloomberg survey median. Readings greater than zero indicate expansion.
Risk to Banks
Financial stocks drove the S&P 500 lower yesterday after Fitch Ratings said further contagion from Europe’s debt crisis will pose a risk to American banks. The group was down 6.1 percent this month through yesterday, compared with a 1.3 percent decline for the benchmark measure.
Banks fell again today. Citigroup slumped 1.2 percent to $26.55. The shares declined 4.1 percent yesterday. Wells Fargo retreated 1 percent to $24.70.
Energy and raw material producers declined as commodities fell. Freeport-McMoRan, the world’s largest publicly traded copper miner, slid 1.2 percent to $37.76. Schlumberger Ltd. (SLB) erased 0.7 percent to $74.25.
Applied Materials dropped 2.5 percent to $12.16. Profit before certain costs will be 8 cents to 16 cents a share, the company said. Revenue will decline as much as 15 percent from the prior quarter, Applied said, indicating sales of as little as $1.85 billion. Analysts on average predicted profit of 18 cents on sales of $2.07 billion, according to Bloomberg data.
‘Triangle’ Pattern
The S&P 500 has formed a “triangle” pattern, a sign to analysts who study charts that the rally is about to resume after the benchmark gauge for U.S. stocks rose as much as 20 percent last month. The index’s trading range has narrowed since October, as the index stalled after rising to its average level over the past 200 days. Based on the size of this triangle pattern, the index may climb as high as 1,430, said Craig W. Johnson, a technical market strategist with Piper Jaffray Cos.
“A triangle or a pennant formation forms during the middle part of a move, and typically these patterns resolve themselves in the direction of the preceding trend,” Johnson, based in Minneapolis, said in a telephone interview yesterday. “That would suggest that this is ‘the pause that refreshes’ before we get the next leg up.”
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
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