Alcoa, which begins the second-quarter earnings season after the market close, slid 0.4 percent. Visa Inc. (V) and MasterCard Inc., the biggest payment networks, lost at least 2 percent after being downgraded at UBS AG. Boeing Co. (BA) increased 1.4 percent after a $7.2 billion order at the Farnborough air show. Amerigroup Corp. (AGP) surged 38 percent as WellPoint (WLP) Inc. agreed to buy the company for $4.9 billion in cash.
S&P 500 futures expiring in September fell 0.3 percent to 1,347.90 at 8:40 a.m. New York time. Dow Jones Industrial Average futures lost 35 points, or 0.3 percent, to 12,692.
Equity futures joined a global slump as Spain’s 10-year debt yield climbed above 7 percent and European finance ministers prepared to meet to hammer out a rescue plan for banks. Alcoa (AA), the largest U.S. aluminum producer, may report an 81 percent decline in second-quarter earnings as the eighth straight year of surplus global production drives down the price of the metal. The shares fell 0.4 percent to $8.69.
The latest quarter is the first since 2009 that analysts project earnings in the S&P 500 will contract after Europe’s debt crisis and slowing growth in China reduced overseas demand. Analyst estimates compiled by Bloomberg show a 1.8 percent decline in profit for S&P 500 companies in the second quarter. Revenue is projected to increase by 2.5 percent.
Stocks fell last week, after the benchmark gauge reached a two-month high, as jobs data heightened concern about a slowing economy and Europe’s efforts to tame its debt crisis disappointed investors.
Visa, MasterCard
Visa retreated 2.2 percent to $122.50, while MasterCard (MA) declined 2 percent to $433. The shares were cut to sell from neutral at UBS.
Boeing added 1.4 percent to $74.69. The company kicked off this year’s Farnborough air show with an order from Steven Udvar-Hazy’s Air Lease Corp. for single-aisle aircraft, as the manufacturer promotes its new, fuel-efficient 737 MAX.
Amerigroup surged 38 percent to $88.95. The stockholders will receive $92 a share. The price is 43 percent above the closing level of Amerigroup in New York Stock Exchange trading on July 6. The acquisition will make WellPoint the top private manager of Medicaid benefits in the U.S., with 4.5 million members in the government-sponsored programs. WellPoint, the second-biggest U.S. health plan, added 4.2 percent to $62.40.
The same securities analysts warning of the first decline in quarterly earnings since 2009 (SPX) are also more bullish than ever on U.S. stocks.
Bullish Bets
A total of 247 companies in the S&P 500 have more buy ratings than sells and holds, a record in Bloomberg data starting in 2000. Bullish recommendations have been expanding even as Wall Street firms cut their forecast for second-quarter net income in the U.S. to a decrease of 1.8 percent from a gain of 2 percent in April, more than 10,000 estimates compiled by Bloomberg show.
Bears say rising equity volatility, declining profits and the approaching U.S. presidential election mean the 4.5 percent drop in the S&P 500 since April will continue. Bulls say analysts are advising clients to buy because earnings are still on track to reach a record this year and the index is trading 16 percent below its average valuation since the 1950s.
“My picks aren’t based on one quarter,” Howard Rubel, a New York-based equity analyst at Jefferies & Co., said in a July 5 phone interview. “It’s not always captured in a headline how many pieces of judgment one needs to incorporate into a stock recommendation, and a quarterly earnings report is only one item. You have to look at things over a period of time.”
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