Thursday, July 23, 2009

U.S. Stock Futures Fall on Microsoft, American Express, Amazon

By Matt Townsend

July 24 (Bloomberg) -- U.S. stock futures fell, indicating the Standard & Poor’s 500 Index will slump after climbing to an eight-month high, as Microsoft Corp., American Express Co. and Inc. posted disappointing quarterly results.

Microsoft, the biggest software maker, retreated 7 percent on lower profit and sales than analysts estimated. American Express slipped 4.6 percent after saying earnings decreased as the recession made it harder for cardholders to keep up with payments. lost 6.6 percent following price cuts that caused sales to miss forecasts.

S&P 500 futures expiring in September declined 0.4 percent to 965.10 at 7:31 a.m. in Tokyo. Dow Jones Industrial Average futures dropped 31 points, or 0.3 percent, to 8,960. U.S. stocks surged yesterday, sending the Dow above 9,000 for the first time since January, as EBay Inc., Ford Motor Co. and AT&T Inc. posted better-than-estimated results and home resales increased more than forecast.

“At these levels in the market, there’s not a lot of room for error,” said Mark Freeman, a money manager at Westwood Management Corp. in Dallas, which oversees $7.5 billion. “Anything that deviates brings about a reevaluation by the market.”

Yesterday, the S&P 500 climbed to the highest level since President Barack Obama was elected on Nov. 4, advancing 2.3 percent to 976.29 at 4:06 p.m. in New York yesterday. The Dow gained 188.03 points, or 2.1 percent, to 9,069.29, the highest since one session after Election Day. The Nasdaq Composite Index surged 2.5 percent to 1,973.6 for a 12th straight gain, its longest streak since 1992 and highest level since October.


EBay rallied 11 percent as its earnings signaled consumers’ appetite for online commerce is starting to recover. Ford jumped 9.4 percent after topping analyst estimates by paring expenses and adding market share. AT&T added 2.6 percent as new customers of Apple Inc.’s iPhone bolstered profit. D.R. Horton Inc. led all 13 stocks in an index of homebuilders higher as sales of existing homes increased for a third straight month. The Dow exceeded 9,000 on Jan. 6.

“With the round number of 9,000 not being there for a significant amount of time, it’s encouraging,” said Michael Koskuba, a New York-based fund manager at Victory Capital Management Inc., which oversees $44 billion. “It’s really a result of companies reporting better-than-expected news. That’s encouraging given that we are in a difficult economic environment.”

Roubini Sees Risk of ‘Double Dip’ Global Recession (Update2)

By Alison Sider

July 23 (Bloomberg) -- The global economy may fall back into a recession by late 2010 or 2011 because of rising government debt, higher oil prices and a lack of job growth, said Nouriel Roubini, the New York University economist who predicted the credit crisis.

A “perfect storm” of fiscal deficits, rising bond yields, “soaring” oil prices, weak profits and a stagnant labor market could “blow the recovering world economy back into a double-dip recession,” he wrote in a research note today. “It is getting more likely unless a clear exit strategy from the massive monetary and fiscal stimulus is outlined even before it is implemented.”

Roubini, chairman of Roubini Global Economics and a professor at NYU’s Stern School of Business, predicted that the global economy will begin recovering near the end of 2009. The U.S. economy is likely to grow about 1 percent in the next two years, less than the 3 percent “trend,” he said.

Roubini based his short-term outlook on the worsening condition of the U.S. housing and labor markets, which he called “inextricably linked.” He said a “weak” job market will contribute to another 13 percent to 18 percent drop in house prices, bringing total declines nationally to as much as 45 percent from their peak.

As a result, Roubini predicted a new round of distress for a financial industry facing economic conditions that were worse than regulators factored into so-called stress tests earlier this year.

11% Unemployment

“The worst-case assumption in U.S. stress tests were that unemployment could average 10.3 percent next year,” Roubini wrote. “The reality is clearly going to be worse as the unemployment rate is likely to peak around 11 percent.”

Emerging markets may fare better than the industrial world because, “paradoxically,” many have better sounder economic foundations than more advanced nations.

“We are now closer than we were six months ago to the end of the worst financial crisis since the Great Depression and the worst global recession in decades,” Roubini wrote. “But the road ahead will be very rough and bumpy.”

Earlier today, a National Association of Realtors report showed sales of existing homes in the U.S. rose in June for a third consecutive month. Purchases climbed 3.6 percent to an annual rate of 4.89 million, stronger than forecast and the highest level since October, the group said.

The report helped push the Dow Jones Industrial Average above 9,000 for the first time since January. The Dow jumped 188.03, or 2.1 percent, 9,069.29, the eighth day of advances in the past nine trading days.