Stock futures fall after Alcoa results disappoint
Stephen BernardStock futures fell Tuesday, pointing to a lower opening, after Alcoa Inc. disappointed Wall Street as it kicked off earnings season.
Overseas markets also mostly fell, reacting to China tightening its monetary policy and boosting bank reserve requirements in addition to the worse-than-expected results from the world's biggest aluminum producer.
As one of the first companies in the Standard & Poor's 500 index to report quarterly results, Alcoa's earnings are often seen as a barometer for how companies will fare.
After the market closed Monday, Alcoa said it earned 1 cent a share excluding one-time items and special charges. Analysts polled by Thomson Reuters, on average, forecast earnings of 6 cents per share.
The company said higher metal prices were offset by ongoing weakness in aerospace, construction and gas turbines businesses.
Revenue also fell at Alcoa. Investors will be tracking revenue as companies report earnings over the next few weeks for any signs that customers are returning to the marketplace. Upbeat earnings in recent quarters have often been due to cost cutting and not revenue growth.
However, a strong economic recovery is dependent on a rebound in consumer and corporate spending, which would result in improving revenue.
Video game publisher Electronic Arts Inc. did not see a rebound in sales during the most recent quarter. It slashed its full-year earnings forecast after the market closed Monday, saying ongoing weakness in game sales didn't ease up over the holidays.
Ahead of the opening bell, Dow Jones industrial average futures fell 75, or 0.7 percent, to 10,529. Standard & Poor's 500 index futures fell 9.10, or 0.8 percent, to 1,133.40, while Nasdaq 100 index futures fell 12.50, or 0.7 percent, to 1,871.00.
Alcoa shares fell $1.15, or 6.6 percent, to $16.30 in premarket trading. Electronic Arts shares fell $1.60, or 8.8 percent, to $16.67.
The Dow and S&P 500 both rose Monday helped by a rise in industrial stocks. The sector got a boost after a report showed Chinese exports jumped 18 percent in December. The larger-than-expected increase came after 13 straight months of declines, raising hopes the world economy is recovering.
Monday's report on Chinese exports and other signs of strengthening in the economy is now pushing the country to tighten up its monetary policy. China's central bank on Tuesday increased the interest rate on its one-year bill to 1.84 percent from 1.76 percent. The rate had been steady since August.
It also raised the ratio of reserves banks must hold by 0.5 percentage points. That change will go into effect Monday.
The U.S. trade imbalance continued to grow in November. The Commerce Department said a jump in exports was more than offset by growing imports as the economy starts to pick up. The trade deficit climbed 9.7 percent to $36.4 billion, its highest level in 10 months.
Meanwhile U.S. bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.74 percent from 3.82 percent late Monday.
The dollar mostly rose, while gold prices fell. Stocks have frequently declined in recent months on days the dollar strengthens. A stronger dollar hurts demand for commodities, which pushes energy and materials stocks lower.
Overseas, Britain's FTSE 100 fell 1.2 percent, Germany's DAX index declined 1.3 percent, and France's CAC-40 dropped 1.4 percent. Japan's Nikkei stock average rose 1 percent.