Stock-Index Futures Decline After China Says It Will Raise Rates Tomorrow

U.S. stock-index futures declined, indicating that the Standard & Poor’s 500 Index will retreat for a second day, as China said it will raise interest rates with effect from tomorrow.

Home Depot Inc. (HD), AT&T Inc. (T) and Bank of America Corp. (BAC) all retreated in German trading. General Motors Co. (GM) and Ford Motor Co. advanced after Morgan Stanley raised its recommendation on the industry to “attractive.”

Futures on the S&P 500 expiring in September declined 0.4 percent to 1,331.6 at 6:37 a.m. in New York after the benchmark gauge slid 0.1 percent yesterday. Dow Jones Industrial Average futures expiring in the same month lost 30 points, or 0.2 percent, to 12,503. The S&P 500 has slipped 1.9 percent since its peak this year at the end of April.

“Equities have corrected over the summer and they may have a little further to fall,” said Garry Evans, global head of equity strategy at HSBC Holdings Plc, in a report to clients today. “We think it’s time to focus again on the uptrend, rather than the wobble. Many of the factors that caused the correction were probably temporary.”

U.S. futures consolidated their losses as China’s central bank said it will raise its benchmark deposit and lending rates by 25 basis points with effect from tomorrow.

A report today may show that service industries in the world’s largest economy expanded at a slower pace last month, showing the expansion cooled at the end of the first half of 2011, economists said before the release which is due at 10 a.m. in New York.

The Institute for Supply Management’s non-manufacturing index fell to 53.7 in June from 54.6 in May, according to the median estimate in a Bloomberg News survey. Readings greater than 50 signal expansion. Other data today include the Mortgage Bankers Association’s mortgage-applications release and Challenger, Gray & Christmas Inc.’s report on job cuts.

Portugal Debt Downgrade
U.S. stocks fell yesterday, halting a five-day winning streak for the S&P 500, after Moody’s Investors Service downgraded Portuguese debt to junk, reigniting concern that Europe’s sovereign-debt crisis will dampen economic growth. The gauge lost 1.8 percent in June as investors speculated that Greece would default on its debt.

Greece’s bondholders meet with officials in Paris today to discuss a proposed rollover of the nation’s debt. European Union leaders insist that private investors contribute to a new aid package for the indebted nation after last year’s 110 billion- euro ($158 billion) rescue failed to contain the euro area’s debt crisis.

Bank of America, the largest U.S. lender, declined 1.4 percent to $10.85 in German trading. Home Depot, the biggest U.S. home-improvement retailer, fell 0.9 percent to $36.26 and AT&T, the second-largest U.S. wireless provider, retreated 0.9 percent to $31.33.

General Motors advanced 1.5 percent to $31.32 after Morgan Stanley upgraded U.S. carmakers to “attractive” from “in- line.” The brokerage named GM as its top pick among automakers. Ford Motor Co. (F) gained 0.8 percent to $14.22.