Falling U.S. Stock Futures Indicate S&P 500 May Extend Drop to Fourth Week

U.S. stock futures fell, signaling that the Standard & Poor’s 500 Index may decline for a fourth week, as concern increased that the global economy is weakening.

Bank of America, the biggest U.S. lender, retreated 3 percent in early New York trading and JPMorgan Chase & Co. (JPM) dropped 1.9 percent in European trading. Financial shares in the S&P 500 sank 5 percent yesterday.

S&P 500 futures expiring in September slumped 1.8 percent to 1,123 at 7:05 a.m. in New York after earlier dropping as much as 2.3 percent. The U.S. equity benchmark lost 4.5 percent yesterday, its biggest decline since Aug. 8. Dow Jones Industrial Average futures retreated 178 points, or 1.6 percent to 10,839 today.

“We have a fear-based, emotional-based market right now,” said Erik Ogard, director of multi-strategy investments at Russell Investments, which oversees $163.4 billion, in an interview with Susan Li on Bloomberg Television’s “First Up.” “There are real economic things to be worried about. However, it’s the degree of the reaction that we think might just be a little overdone.”

Citigroup Inc. cut its growth forecasts for the world’s largest economy. The U.S. economy may expand less than previously forecast in 2011 and 2012 because of potential “political paralysis” and fiscal-tightening measures, Citigroup analysts wrote in a report dated yesterday. The brokerage cut its 2011 gross domestic product growth forecast to 1.6 percent from 1.7 percent and lowered its 2012 GDP growth estimate to 2.1 percent from 2.7 percent.

Reports yesterday showed that American jobless claims rose and a measure of manufacturing in the Philadelphia region unexpectedly contracted.

Global Economy
The S&P 500 has tumbled 3.2 percent this week as concern mounted that the global economy is faltering and as investors speculated that European banks lack enough capital. The gauge has slumped 16 percent from its April 29 high, matching the retreat between April 23 and July 2, 2010, previously the biggest contraction of the bull market that began in March 2009. The Dow lost more than 400 points yesterday for the fourth time this month.

“The concern has always been about this whole debt and sovereign overhang to the point that you think, ‘How long should I continue to hold the stock?’,” Manish Singh, head of investment at Crossbridge Capital, which has about $2 billion under management, said in a telephone interview from London. “There’s no clarity coming from Europe. What the market wants is clarity.”

Bank of America
Bank of America, the biggest U.S. lender, dropped 3 percent to $6.80 in early New York trading. Chief Executive Officer Brian T. Moynihan told his managers to expect 3,500 job cuts this quarter. Moynihan has come under pressure to reduce outlays at the bank, which has lost almost half its market value this year, as costs tied to the 2008 takeover of subprime lender Countrywide Financial Corp. mount and revenue shrinks amid signs of a U.S. slowdown.

JPMorgan, the second-biggest U.S. bank, declined 1.9 percent to $34.51 in German trading.