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US stocks-index futures slip

Oct 06 2016 15:30
Sofia Horta e Costa

London - US stock-index futures slipped as shares in Europe erased an advance, while investors awaited more evidence that the economy is strong enough to cope with higher borrowing costs.

Wal-Mart Stores declined 1.8% after forecasting earnings for its next fiscal year that trailed some analysts’ estimates.

Twitter tumbled 17% following a report that Alphabet’s Google isn’t interested in buying the social-networking service.

Salesforce.com, also said to be a contender in bidding for Twitter, climbed 2.3%. Europe’s Stoxx 600 Index wiped out a 0.4% gain despite an advance by banks.

S&P 500 Index contracts expiring in December fell 0.1% to 2 150.5 at 8:53 in New York, while those on the Dow Jones Industrial Average slipped 22 points to 18 178.

The underlying equity gauges on Wednesday rebounded from two days of losses after reports showed acceleration in the manufacturing and services sectors, allaying concerns that a potential interest-rate increase from the Federal Reserve this year would hurt growth.

Crude oil futures rose above $50 a barrel for the first time since June.

“This is an economy that doesn’t need emergency rates any more,” said Ben Kumar, a London-based investment manager at Seven Investment Management, which manages the equivalent of $13bn.

“Recent data and upbeat Fed comments on growth have allowed investors to get more comfortable with that idea, and it means they’re ready to tolerate a bit of higher market volatility.

It’s been a difficult year for stocks. A lot of people will be pretty happy with any gains they have and will maybe want to sit back for now.”

The labour market showed further signs of strengthening as a report today showed filings for US unemployment benefits fell last week almost to the lowest level since 1973. Continuing claims declined to the lowest since 2000.

Economists surveyed by Bloomberg forecast data tomorrow will show the economy added 172 000 jobs in September, up from 151 000 a month earlier.

Odds for the Fed to raise borrowing costs in December held at 62% following the claims data, up about 10 percentage points from last week. Traders are pricing in a nearly 24% chance of a hike in November.

The September release is in focus, after a Bloomberg index tracking economic surprises in the US turned positive yesterday for the first time since August, meaning that more reports are beating forecasts.

The upcoming earnings season will also provide fresh indications on the health of corporate America.

Analysts are still predicting a profit contraction for S&P 500 members in the third quarter, a sixth straight drop, before Alcoa unofficially kicks off the reporting period on October 11.

Stocks bounced back from a rocky start to the month, after the S&P 500 slipped 0.8% in the first two sessions.

While the gauge has historically been more volatile in October, it’s also a month that has typically yielded the best gains of the year, with an average advance of 1.9% over the past 25 such periods. The benchmark on Wednesday closed 1.4% below the record it last reached in August.

Among other stocks active on corporate news, Alnylam Pharmaceuticals plunged 45% after stopping development of its late-stage experimental drug for a rare disease, saying more patients taking the drug were dying compared with those getting a placebo.

Yum! Brands slipped 2.4% after the fast-food giant that owns KFC and Pizza Hut reported worse-than-expected sales and profit because of an unexpected slowdown in China.

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