Week of September 6, 2010

U.S. Stock Futures Decline; Bank of America, Citigroup, Alcoa Shares Drop
By Sarah Jones

U.S. stock-index futures retreated, indicating that the benchmark Standard & Poor’s 500 Index may end its longest winning streak since July.

Bank of America Corp. fell in German trading and Citigroup Inc. dropped in composite European trading amid concern European bank stress tests understate sovereign debt holdings. Alcoa Inc. and Exxon Mobil Corp. declined with commodity prices.

Futures on the S&P 500 expiring this month dropped 0.6 percent to 1,096.7 at 11:04 a.m. in London as investors returned from yesterday’s Labor Day holiday. Dow Jones Industrial Average futures lost 0.5 percent to 10,387, while Nasdaq-100 Index futures retreated 0.4 percent to 1,859.25.

U.S. stocks last week snapped three weeks of declines as better-than-estimated growth in private employment and manufacturing raised optimism that the world’s largest economy will avoid slipping back into recession. Even so, the S&P 500 remains 9.3 percent below this year’s peak in April.

“We are observing a loss of recovery momentum,” said London-based Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. on Bloomberg Television’s ‘On The Move’ with Francine Lacqua. “The economy is slowing but I don’t feel that we are going into a double dip. Risks have clearly risen.”

Central banks in Japan and Australia today signaled that the outlook for U.S. growth is deteriorating, making it tougher for them to set monetary policy.

The Reserve Bank of Australia extended a pause in raising interest rates “for the time being,” even after the nation’s gross domestic product rose the most since 2007. The Bank of Japan said it’s prepared to add more monetary stimulus after it decided last week to expand a credit program after the U.S. dollar tumbled against the yen.

Transport Spending

President Barack Obama plans to increase tax relief for businesses and federal spending on the nation’s transport system to bolster an economy that has rising unemployment headed into November’s congressional elections. The jobless rate may approach 10 percent in coming months, according to economists at BofA Merrill Lynch Global Research and Morgan Stanley.

Bank of America lost 1.7 percent to $13.28 in composite European trading, and Citigroup declined 1.2 percent to $3.86 in German trading.

Banks in Europe retreated today after the Wall Street Journal reported that the stress tests published in July understated some financial institutions’ sovereign debt holdings. The newspaper cited its own analysis. Separately, the Association of German Banks yesterday said the nation’s 10 largest lenders may need about 105 billion euros ($134 billion) in fresh capital, impairing the country’s economic recovery by limiting the banks’ ability to lend.

Alcoa, Freeport

Alcoa, the largest U.S. aluminum producer, slid 0.9 percent to $10.78 as all six main metals traded on the London Metal Exchange retreated. Freeport McMoRan Copper & Gold Inc., the world’s second-largest copper producer, lost 0.7 percent to $78.02 in Germany.

Copper snapped a four-day winning streak as a stronger dollar reduced demand for industrial metals as alternative investments.

Exxon paced energy producers lower as oil traded near a four-day low. The shares lost 0.2 percent to $61.20 in Germany while Chevron Corp., the second-largest U.S. oil company, slipped 1.3 percent to $77.01.