KCG Morning Update:
U.S. stock-index futures fell, following the Standard & Poor’s 500 Index’s worst week since 2012, as investors awaited earnings and retail-sales data, while violence escalated in Ukraine.
Citigroup Inc. lost 1.9 percent in Germany before it reports first-quarter earnings. Johnson & Johnson retreated 1 percent after Jefferies Group LLC cut its rating on the drugmaker’s shares.
S&P 500 futures expiring in June declined 0.1 percent to 1,809.5 at 6:10 a.m. in New York. The S&P slid 1 percent on April 11, completing its worst week since 2012, as technology shares dropped on valuation concerns and JPMorgan Chase & Co. tumbled after reporting first-quarter profit that missed
analysts’ estimates. Dow Jones Industrial Average contracts lost 21 points, or 0.1 percent, to 15,960 today.
“There’s some nervousness around the U.S. earnings season and obviously with the added geopolitical worries, that’s enough to unsettle some investors,” said Henk Potts, who helps oversee about $310 billion as a strategist at Barclays Wealth & Investment Management in London. “We had JPMorgan come in below expectations so it’s clear it’s been a pretty tough quarter for U.S. financial services. We’ll get a much better picture of corporate America come this week with some more earnings coming
through.”
M&T Bank Corp. also posts earnings today, while Coca-Cola Co., Goldman Sachs Group Inc., Yahoo! Inc., Google Inc. and General Electric Co. are among companies scheduled to report later this week.
A Commerce Department report at 8:30 a.m. in Washington may show that retail sales rose 0.9 percent in March, according to the median forecast of analysts surveyed by Bloomberg. Sales increased 0.3 percent in February.
European stocks fell for a third day, after completing their worst week in a month, as investors
weighed increasing violence in Ukraine. U.S. stock-index futures were little changed, while Asian shares dropped.
PSA Peugeot Citroen slid 4.4 percent after saying it will cut its model lineup by almost half. Kuehne & Nagel International AG lost 3.4 percent after the world’s biggest sea-freight forwarder reported first-quarter sales that missed estimates. Symrise AG dropped 2 percent after offering to buy Diana Group. Glencore Xstrata Plc rose after selling its stake in the Las Bambas copper mine in Peru.
The Stoxx Europe 600 Index fell 0.5 percent to 327.07 at 12:12 p.m. in London, posting its fifth decline in six days. Standard & Poor’s 500 Index futures gained less than 0.1 percent, while the MSCI Asia Pacific Index lost 0.3 percent.
• Support:1808, 1801, 1780
• Resistance:1829, 1842, 1863
Projections that earnings will rise much faster than sales at U.S. companies may be too optimistic, according to Andrew Burkly, an Oppenheimer & Co. strategist.
The CHART OF THE DAY displays the projected percentage gaps between profit and revenue growth for companies in the Standard & Poor’s 500 Index through 2016, according to data compiled by Bloomberg from analysts’ estimates. Quarterly figures for last year are included for comparison.
Analysts are looking for the S&P 500’s first-quarter earnings to increase 1 percent, or 1.9 percentage points less than sales. They see profit leading by 3.6 points in the second quarter, 5.2 points in the third and 6.2 points in the fourth.
Companies will have to increase profit margins to records to meet estimates, Burkly wrote two days ago in a report. The result is “a scenario we view with ongoing skepticism,” the New York-based portfolio strategist wrote.
The margin for U.S. companies during last year’s fourth quarter was the highest since 1950, according to data compiled by the Commerce Department. Earnings for the period amounted to 12.7 percent of revenue.
Finding ways to reduce costs and make workers more productive will be “an increasing challenge,” Burkly wrote, adding that many companies lack the pricing power to bolster revenue. “Forecasts for earnings growth will have to be pared to allow companies to satisfy investor expectations,” he wrote.
