U.S. stock-index futures dropped after OPEC ministers said oil prices may remain above $30 a barrel, rekindling concern that higher energy costs will crimp corporate profits and limit consumer spending. Two-thirds of the stocks in the Dow Jones Industrial Average fell in Europe, including Intel Corp., McDonald's Corp. and SBC Communications Inc.
Standard & Poor's 500 Index futures expiring in June lost 3.10 to 1093.50 at 8:40 a.m. in New York. Dow futures shed 33 to 9937 and Nasdaq-100 Index futures lost 5 to 1413. ``Investors remain concerned about any oil disruptions that might evolve from the transition of power in Iraq,'' said Christine Callies, who helps oversee $41 billion as market strategist at Bessemer Trust Co. ``They want reassurance that none of this stuff is going to disrupt the expansion in the U.S.'' Higher energy prices and expectations that the Federal Reserve will raise its benchmark interest rate next month sent the S&P 500 to its low for the year on May 17. Crude oil futures for July delivery rose to a record $41.72 a barrel yesterday, and were recently $41.43 in electronic trading on the New York Mercantile Exchange.
Dow Stocks Drop
Intel, the world's largest computer-chip maker, shed 20 cents to $27.54 in Germany and McDonald's, the No. 1 restaurant chain, fell 8 cents to $25.27. The Saudi oil minister, Ali al-Naimi, said crude at $30 to $34 a barrel in New York reflects the current costs of investing and maintaining oil fields. Members including Iran, Nigeria and Venezuela said they want prices at the top end or above the official Organization of Petroleum Exporting Countries target of $22 to $28.
SBC Communications
SBC Communications fell 15 cents to $24.04 in Germany. The No. 2 U.S. local-phone company agreed with a union not to fire workers for five years and rehire other staff that had been fired. The company's agreement with the Communications Workers of America covers contracts for 100,000 employees who returned to work today after a four-day strike. Separately, Deutsche Telekom AG plans to pay $2.5 billion for networks in California and Nevada owned by Cingular Wireless LLC, a venture of SBC and BellSouth Corp. Novell Inc. fell 77 cents to $9.20. The maker of network software said second-quarter sales of new licenses were $60.3 million, below the $64.5 million estimate of Brendan Barnicle, analyst at Pacific Crest Securities. Medtronic Inc. rose 45 cents to $47.80. The world's largest maker of devices that regulate heartbeats said fiscal fourth- quarter profit excluding certain costs was 48 cents a share for the period through April 30, beating the 46-cent average estimate of analysts polled by Thomson Financial. Shares of Williams-Sonoma Inc. added 40 cents to $31.75. The owner of the Pottery Barn and Williams-Sonoma retail chains said it had a profit of 18 cents a share on revenue of $640.9 million in the first quarter ended May 2. The company was expected to earn 16 cents a share on sales of $635.5 million, according to Thomson.
Consumer Confidence
Some investors such as Robert Morris, director of equity investment at Lord Abbett & Co., say higher energy prices will not slow corporate profit growth. ``The oil price at this level is being absorbed and it will continue to be absorbed,'' said Morris, who oversees $78 billion in assets in New York. ``Corporate profits are the story of this market.'' Economic reports due today may show the impact that record gasoline prices and a rise in interest rates have had on the U.S. economy. Consumer confidence in the world's biggest economy probably rose for a second straight month in May as payrolls expanded, and April resale of houses are forecast to have held at the second highest pace on record, surveys of economists showed.
The New York-based Conference Board's gauge of sentiment may increase to 94 this month, the highest since January, compared with 92.9 in April, according to the median forecast of 60 economists surveyed by Bloomberg News. The index averaged 103 during the record expansion from 1991-2001. The National Association of Realtors in Washington may report that existing homes sold at a 6.46 million annual rate in April, compared with 6.48 million the month before. The March pace was second to the record 6.68 million in September. The average rate on a 30-year mortgage has risen by almost a percentage point from a nine-month low of 5.38 percent in March.
Genworth
General Electric Co.'s Genworth Financial Inc. insurance unit starts trading today. General Electric late yesterday sold 145 million shares of Genworth at $19.50 each. That's 7.1 percent less than the low end of the $21 to $23 a share range indicated in a Securities and Exchange Commission filing. Bob Evans Farms Inc. lost $2.10, or 7.4 percent, to $26.30. The sausage maker and U.S. restaurant chain owner said it expects fiscal 2005 profit of $1.80 to $2 a share because of higher hog prices. Analysts expected the company to earn $2.21 a share, according to Thomson. Dyax Corp. plunged $7.36, or 51 percent, to $7.05. The developer of drugs to treat cancer said the U.S. Food and Drug Administration has put its recombinant protein DX-88 on clinical hold until the company answers questions related to the results of preclinical animal studies. ///www.bloomberg.com