U.S. Stock-Index Futures Drop; S&P 500 May Extend One-Year Low

By Adam Haigh - Oct 4, 2011 4:56 AM ET

U.S. stock-index futures fell, indicating the Standard & Poor’s 500 Index will drop for a third day, as European policy makers struggled to reassure investors they can contain the euro area’s debt crisis.
Futures on the S&P 500 expiring in December slid 0.2 percent to 1,084.1 at 9:54 a.m. in London, erasing earlier gains of as much as 0.7 percent. Dow Jones Industrial Average futures lost 28 points, or 0.3 percent, to 10,501.

“We are getting all these mixed macro signals,” said Peter Garnry, an equity strategist at Saxo Bank A/S, in an interview with Linzie Janis on Bloomberg Television’s“Countdown” from Hellerup, Denmark. “We still have all these issues in Europe and a very fragile banking system. It’s very difficult to predict where the market will go in either direction.”

Investors who bought S&P 500 shares three years ago and held on to the stocks have made no profit. The gauge closed at 1,099.23 yesterday, the same closing level as on Oct. 3 2008 and the benchmark measure’s lowest close since Sept. 8, 2010.

The S&P 500 came within 1 percent of extending its decline from this year’s high to 20 percent, the common definition of a bear market. Losses accelerated in the S&P 500 after the gauge fell below a series of levels considered significant by analysts who base their investment decisions on charts. The index slipped below 1,119.46, its previous lowest close of the year, just before 12:50 p.m. and breached 1,114.22, the worst intraday level from September, about 15 minutes later.

Bear Markets

Concern governments may be running out of tools to keep the global economic slowdown from worsening has left equities fromSao Paolo to Hong Kong and Frankfurt in bear markets. Bank of America Corp. (BAC) lost 9.6 percent yesterday and has slumped 59 percent in 2011. The declines have confounded bullish investors who speculated the recovery that began in March 2009 would boost stocks for a third year.

Companies in the benchmark gauge for American equities trade at 9.8 times 2012 forecast earnings, compared with the average in economic contractions since 1957 of 13.7, according to data compiled by Bloomberg. At the same time, analysts have cut projections for profits next year by 2.6 percent to $110.78 a share, the biggest eight-week drop since 2009, the data show.

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