U.S. stock futures fell Monday after Germany warned against expectations Europe will devise a quick fix for its debt crisis and after a measure of U.S. manufacturing came up short.
Futures on the Dow Jones Industrial Average DJ1Z -0.66% fell 37 points to 11,529. Futures on the Standard & Poor’s 500 stock index SP1Z -0.20% fell 3.7 points to 1,215.50 and Nasdaq 100 futures ND1Z -0.61% slipped 14 points to 2,353.25.
The New York Federal Reserve’s index of regional manufacturing rose to minus 8.48 in October from negative 8.82 in September.
Corporate earnings will likely continue to take a back seat to European developments, strategists said.
A weekend meeting of finance ministers from the Group of 20 industrialized and developing nations in Paris saw international pressure heaped on European leaders to finalize a definitive plan when they gather in Brussels for a summit meeting on Sunday.
Markets initially priced in a “perfect solution,” said Kathleen Brooks, research director at Forex.com. Asian equities ended higher, European equities gained and U.S. stock futures pointed to a higher open.
But European markets soon turned mixed and U.S. stock futures retreated after German Chancellor Angela Merkel’s spokesman warned against expectations for a quick fix.
“The chancellor has pointed out that dreams building up that this package will mean everything will be solved and over by Monday cannot be fulfilled,” Seibert told reporters, according to Reuters. Seibert said leaders are working on a “long path” that will take them far into 2012. Read Market Pulse about Germany’s warning.
“Markets had been expecting the crisis to at least stabilize by this weekend’s EU [European Union] summit, so comments such as these are not helping sentiment,” Brooks said.
With the crisis nearly two years old, strategists said it pays to be cautious when dealing with expectations for European leaders to make lasting progress toward a solution.
Experience offers little reason to think that “European policy makers [will] deliver more than expected and thus get ahead of the curve,” wrote strategists at KBC Markets in Brussels.
“It might be different this time, but we wouldn’t front-run on such an eventuality. Therefore, markets may start to build some prudence in their attitude, slowing or stopping the rally in risky assets.”
On the corporate front, shares of El Paso Corp. EP +23.05% jumped in preopen trading, a day after Kinder Morgan Inc. KMI +7.40% said it would buy its fellow natural-gas pipeline operator in a $38 billion cash, stock and warrant deal that includes $17 billion in debt. The acquisition would create the largest U.S. natural-gas pipeline network. Read about the deal.
Houston-based Anadarko Petroleum Corp. APC +3.25% and BP PLC UK:BP +2.86% BP +1.00% said they agreed to settle their dispute tied to the Deepwater Horizon oil rig disaster of spring 2010. Anadarko will pay BP $4 billion and the two companies will mutually drop claims against each other.
Norway’s Statoil STO -2.29% NO:STL -0.51% on Monday announced the acquisition of Texas-based oil firm Brigham Exploration Co. BEXP +19.80% in a deal valued at around $4.7 billion.
Earnings reports from big banks had Wells Fargo & Co. WFC -5.77% reporting a third-quarter profit rise of 21%, but its revenue dropped and missed estimates, with its shares off 4.4%, and Citigroup Inc. C +2.04% shares rose 1.7% after it beat earnings expectations.
J.P. Morgan Chase & Co. JPM -1.04% on Thursday was the first major bank to deliver earnings, reporting a 3.5% drop in third-quarter profit amid higher non-interest expenses. The bank, however, posted a surprise increase in revenue.
Bulls hope to extend last week’s strong performance by equities as earnings season moves into full swing. The Dow Jones Industrial Average DJIA -0.76% rose nearly 5% last week, while the Nasdaq Composite Index COMP -0.81% gained 7.6% and the S&P 500 Index SPX -0.92% finished with a 6% increase.
