Futures drop as Alcoa, AMD fan profit worry
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Tue, 08 Apr 2008 11:45:02 GMT |
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By Ellis MnyanduNEW YORK (Reuters) - Stock futures fell on Tuesday after aluminum company Alcoa Inc reported profit below analysts' estimates and chip maker Advanced Micro Devices Inc said quarterly revenue would miss Wall Street expectations, fueling fears about the corporate profit outlook.With metal prices slipping, shares of mining and other natural resource companies appeared set to decline, while AMD's news was likely to weigh on technology shares.Despite signs the economy may have already slipped into recession, investors had hoped the start of the first-quarter earnings reporting season would bring positive surprises to justify loftier equity prices.But the market's mood was gloomy on news from Alcoa, the first Dow company to announce quarterly results, and AMD, along with declines in Asian and European stocks."Technology is losing a little steam here," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey. "Companies from which the public is looking for decent earnings numbers, like technology, I think, are disappointing with the numbers that are coming out."S&P 500 futures declined 6.5 points and were below fair value, a formula to evaluate pricing taking into account interest rates, dividends and time to expiration on the contract.Dow Jones industrial average futures fell 53 points, and Nasdaq 100 futures shed 10.75 points.Alcoa's shares fell 4.6 percent in Europe after the aluminum producer and a Dow component said its first-quarter profit was halved from a year ago because of energy costs and the weak dollar.Shares of AMD slid nearly 8 percent in Europe. The second largest maker of computer processors said after Monday's close that it would cut 10 percent of its work force, or about 1,680 jobs, and gave a first-quarter revenue estimate below expectations.Financials, however, could be cushioned by the news that Washington Mutual Inc and its advisers are working out the final details of the plan for capital injection from investors led by private equity firm TPG.The Wall Street Journal, citing a person familiar with the matter, reported that while exact terms of the deal are still unclear, the total value of the financing could be as much as almost $7 billion. On Monday the newspaper had report that the largest U.S. savings and loan, was close to getting a $5 billion capital infusion.Reuters Estimates in its latest forecast said earnings for Standard & Poor's 500 companies are expected to decline 11.8 percent in the first quarter, compared with the 8.1 percent drop projected last week.U.S. stocks had ended little changed on Monday amid anxiety about corporate earnings picture and as rising oil prices stoked fears that soaring energy costs may squeeze companies and consumers.(Editing by Kenneth Barry)
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