U.S. Stock-Index Futures Fluctuate on Oil, Metals; Alcoa Gains

By Rita Nazareth

Oct. 7 (Bloomberg) -- U.S. stock-index futures swung between gains and losses after oil and metal prices retreated from their highest levels of the day as the dollar rebounded, overshadowing optimism Alcoa Inc.’s quarterly report will help extend a seven-month equity rally.

Exxon Mobil Corp. and ConocoPhillips fell as crude’s gain was reduced by two-thirds. Alcoa, the largest U.S. aluminum company, gained 2.2 percent. Monsanto Co., the world’s biggest seed producer, rallied 4.1 percent after beating profit estimates. Yum! Brands Inc., the owner of the Taco Bell and KFC restaurant chains, increased 1.2 percent after lifting its earnings forecast for the year.

Standard & Poor’s 500 Index futures expiring in December climbed 0.1 percent to 1,049.40 at 8:36 a.m. in New York, after rallying as much as 0.6 percent earlier. Dow Jones Industrial Average futures gained 12 points, or 0.1 percent, to 9,666. Stock futures pared gains as the dollar rose, driving down commodity prices including oil.

“A combination of revenue growth plus companies exceeding margins is going to help lift stocks over the next several weeks,” Jeffrey Kleintop, who helps oversee about $247 billion as chief market strategist at LPL Financial in Boston, told Bloomberg Radio. “We could maybe even see 1,125 on the S&P 500 by year-end.”

Alcoa begins the third-quarter earnings season that analysts estimate will mark the ninth straight period of declining profits. Still, for the second quarter, 72.3 percent of S&P 500 companies surpassed the average analyst estimate for earnings, matching the highest proportion in Bloomberg data going back to 1993.

Yesterday’s Rally

U.S. stocks rose yesterday, extending a worldwide rally, on speculation third-quarter earnings will top estimates and growing conviction the global economy is improving. The S&P 500 surged 32 percent in the last two quarters amid expectations the worst of a global recession is over. Worse-than-forecast data on manufacturing and jobs last week spurred concern the rally may have outpaced the prospects for earnings growth.

Citigroup Inc. strategists said they “target” 20 percent gains in global equities by the end of 2011. “This is the period towards the end of most global recessions when equity prices rise sharply even though earnings are still falling,” strategists including Robert Buckland wrote in a report. “An aggressive pro-cyclical strategy works best.”

Exxon fell 0.1 percent to $68.61 while ConocoPhillips slumped 0.4 percent to $48.21. Crude oil added 0.4 percent to $71.13 a barrel in New York, paring a gain of 1.2 percent as the U.S. Dollar Index reversed a decline and rose 0.2 percent.

Alcoa Advances

Alcoa rallied 2.2 percent to $14.19. The aluminum producer is forecast to report a loss excluding some items of 9 cents a share, the average estimate of 16 analysts in a Bloomberg survey. The New York-based company earned 37 cents a share on the same basis a year earlier.

Monsanto gained 4.1 percent to $78.73. The world’s biggest seed producer reported fourth-quarter ongoing profit of 2 cents a share. Analysts estimated 1 cent.

Yum! Brands Inc. rose 1.2 percent to $35.28. The owner of the Taco Bell and KFC restaurant chains raised its full-year earnings forecast and posted third-quarter profit that advanced more than analysts estimated.

General Electric Co. and Intel Corp. are among the 42 S&P 500 companies that will release results in the next two weeks. Analysts’ estimates compiled by Bloomberg predict companies will report a ninth straight quarter of declining profits before returning to growth in the final three months of the year.

“Earnings overall will be above expectations, and we will see positive surprises as a result of the economic recovery,” said Urs Eilinger, Zurich-based chief investment officer at Infidar Investment Advisory Ltd., which manages about $3.2 billion. “More people are moving money from cash back to the market. Gold is in an upward trend. We will see equity markets and commodity prices continue to run parallel.”