Market measuring geopolitical risk

U.S. stock futures fell, after the biggest Standard & Poor’s 500 Index (CME:SPU14) rally since April, as concern over geopolitical tensions kept investors on the sidelines before major companies report earnings.

Hasbro Inc. fell 3.7% after reporting revenue that missed analysts’ estimates. BB&T Corp. slid 4.8% as adjusted profit fell short of targets. Reynolds American Inc. dropped 2.8% after a jury ordered a unit of the company to pay a Florida woman $23 billion for her husband’s death from lung cancer. Halliburton Co. gained 0.8% after reporting that second-quarter revenue topped estimates.

Futures on the S&P 500 expiring in September lost 0.2% to 1,967.3 at 8:45 a.m. in New York. Dow Jones Industrial Average contracts fell 37 points, or 0.2%, to 16,995 today.

“People are naturally cautious against these geopolitical events and the market having had such a strong rally,” said Patrick Spencer, the London-based head of equity sales at Robert W. Baird & Co., which oversees more than $100 billion. “These concerns are all geopolitical because earnings have been reasonable. Markets are nervous given we haven’t had a correction yet so people are thinking we’re overdue. People are just looking for reasons for the market to sell off.”

A total of 10 S&P 500 companies are reporting earnings today, including Chipotle Mexican Grill Inc., Netflix Inc. and Botox-maker Allergan Inc. Some 140 companies in the gauge report this week.
 

Geopolitical Tension
 

The S&P 500 rallied 1% on July 18, rebounding from its biggest loss since April 10 that came after the downing of a Malaysian Airlines passenger jet in Ukraine and the Israeli ground invasion of the Gaza Strip.

European Union foreign ministers meeting in Brussels tomorrow will consider tougher sanctions on Russian individuals and companies as world leaders pressure Putin to do more to end the violence in eastern Ukraine.

In the Middle East, diplomatic efforts to end two weeks of Gaza Strip fighting intensified after battles killed dozens of Palestinians and 13 Israeli soldiers in the conflict’s bloodiest single day.

The S&P 500 ended last week up 0.5%, rallying on the final day of the week after better-than-estimated sales at Google Inc. spurred a rebound in shares.

The equities benchmark has rallied 7% this year through July 18 amid better-than-estimated corporate earnings and central bank stimulus a the U.S. economy shows signs of recovering from a 2.9% contraction in the first quarter.
 

Earnings Scorecard
 

About 76% of those that have posted results this season have beaten analysts’ estimates for profit, while 68% exceeded sales projections, according to data compiled by Bloomberg.

Earnings at S&P 500 members probably rose 6.2% in the second quarter, while sales gained 3.3%, according to analyst estimates compiled by Bloomberg.

Hasbro lost 3.7% to $51.25 The toys and game maker reported second-quarter revenue that fell short of estimates. Rival Mattel Inc. last week said earnings and sales fell short of forecasts.

BB&T sank 4.8% to $37.05. North Carolina’s second- largest bank reported profit that missed estimates and disclosed that the U.S. Department of Housing and Urban Development is auditing its originations of government-backed loans.
 

Reynolds, Halliburton
 

Reynolds retreated 2.8% to $57. A jury ordered one of the company’s units to pay a Florida woman punitive damages for the 1996 death of her husband. Since a Florida Supreme Court decision in 2006, individual plaintiffs in the state have been awarded large verdicts, with most of those being reduced on appeal.

Halliburton added 0.8% to $71.49 after reporting that sales beat the average analyst estimate. The company also boosted its share buyback to $6 billion.

SunTrust Banks Inc. increased 1.5% to $40.30. The company posted adjusted earnings of 81 cents a share in the second quarter, topping the average analyst projection of 76 cents.

EMC Corp. rallied 4.5% to $28.20 after the Wall Street Journal reported that Elliott Management Corp. bought a stake in the maker of storage computers for more than $1 billion.

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Comments
comments powered by Disqus