U.S. Stock-Index Futures Retreat as Greece Leads Jump in Euro-Area Deficit
U.S. stock-index futures declined as Greece and Ireland led a surge in the euro region’s budget deficit, reigniting concern that mounting government debt may derail the economic recovery.
Qualcomm Inc. plunged 7.9 percent in Germany as the biggest maker of chips that run mobile phones forecast sales and profit for this quarter that fell short of analysts’ predictions. EBay Inc. sank 8.4 percent after its forecast for second-quarter profit missed estimates as customers switched to competitors. Philip Morris International Inc. dropped 1.2 percent as earnings trailed analysts’ forecasts.
Futures on the Standard & Poor’s 500 Index expiring in June slid 0.6 percent to 1,193.6 at 7:25 a.m. in New York, while Dow Jones Industrial Average futures fell 0.4 percent 11,015. Futures on the Nasdaq-100 Index dropped 0.6 percent to 2,013.
“One of the worries in the market is the ability of governments in Western Europe and North America to reduce their level of debt,” said Stephen Pope, chief global equity strategist at Cantor Fitzgerald in London. “We are beginning to find this a problem and equity markets have started to take some money of the table.”
The European Union said today Greece’s deficit was 13.6 percent of gross domestic product last year, higher than the government’s April 7 forecast of 12.9 percent, and could top 14 percent as “off-market swaps” cloud its estimates. Ireland overtook Greece as the EU nation with the largest shortfall, which was revised up to 14.3 percent.
Greek bond yields have surged to the highest in more than a decade on concern that the nation’s surging budget deficit will leave the country struggling to finance its debt. The cost of one-year default insurance on the country’s debt jumped 112 basis points to a record 752 today, according to CMA DataVision.
President Barack Obama is due to make a speech today in which he will take aim at “risky decisions” made on Wall Street, according White House press secretary Robert Gibbs. The address, scheduled to begin at 11:55 a.m. at New York’s Cooper Union, is intended to build momentum for legislation to overhaul U.S. financial regulations.
Qualcomm dropped 7.9 percent to $39.28 in Germany. The company projected profit of 40 cents to 44 cents a share for this quarter. Analysts predicted 44 cents, according to the average estimate in a Bloomberg survey.
EBay retreated 8.4 percent to $24.08 after the owner of an e-commerce marketplace and the PayPal online payment service said second-quarter profit will be 37 cents to 39 cents a share, excluding one-time items. Analysts in a Bloomberg survey had estimated 40 cents on average.
Philip Morris fell 1.3 percent to $51.33 in Germany. The world’s largest publicly traded tobacco maker reported first- quarter profit of 90 cents a share on an adjusted basis. Analysts surveyed by Bloomberg had estimated profit of 93 cents on average.
About 87 percent of S&P 500 companies that have reported first-quarter results beat the average analyst earnings estimate, according to data compiled by Bloomberg, which could mark a record proportion in data going back to 1993.
SanDisk Corp. rallied 7.2 percent to $40.28 in German trading after the biggest maker of flash-memory cards for digital cameras and phones reported first-quarter profit excluding some items of 99 cents a share, beating the average analyst estimate by 68 percent.
Reports today may show sales of U.S. previously owned homes rose in March for the first time in four months, while weekly initial jobless claims dropped last week.
The National Association of Realtors’ report, due at 10 a.m. in Washington, may show purchases of previously owned homes rose 5.3 percent, according to a survey of economists.
A separate report from the Labor Department at 8:30 a.m. might show initial jobless claims dropped last week to 450,000 from 484,000 the prior week, according to the survey median, while other data may show inflation is contained.
To contact the reporter on this story: Sarah Jones in London at email@example.com.