U.S. Stock-Index Futures Fall; MBIA, Amazon.com, Starbucks Drop

By Michael Patterson

Jan. 31 (Bloomberg) -- U.S. stock-index futures fell on concern that the Federal Reserve's interest-rate cuts will fail to rescue the economy from the collapse of the subprime mortgage market.

MBIA Inc., the largest bond insurer, tumbled after reporting a record loss that put its AAA credit rating further into jeopardy. Citigroup Inc. led banks lower after Standard & Poor's said mortgage-related writedowns at financial companies may exceed $265 billion. Futures extended declines after European markets fell and the Labor Department reported a bigger-than-forecast increase in initial jobless claims.

The S&P 500 is headed for its worst-ever January on concern credit-market losses will cause the world's largest economy to contract. S&P 500 futures expiring in March retreated 17 to 1,333.6 as of 8:55 a.m. in New York. Dow Jones Industrial Average futures decreased 130 to 12,264. Nasdaq-100 Index futures slipped 23 to 1,788.5.

``It's hard to imagine earnings rising across the board in such an environment,'' said Juergen Lukasser, who helps manage the equivalent of about $20 billion as head of equities at Constantia Privatbank AG in Vienna. ``The financial industry is in dark clouds. We're far from being out of the woods yet.''

Profit excluding some items at S&P 500 companies probably fell 18 percent in the fourth quarter, the biggest decline since 2001, according to analysts' estimates compiled by Bloomberg. For the current quarter analysts expect earnings to rise 1.2 percent.

U.S. stocks fell yesterday on concern bond insurers, which combined guarantee $2.4 trillion of debt, will lose AAA credit ratings. The S&P 500 erased a 90-minute, 1.7 percent rally that was spurred by the Federal Reserve's second rate cut in nine days.

Insurance Concern

MBIA lost $1.14 to $12.82. The fourth-quarter net loss of $18.61 a share came a day after FGIC Corp.'s insurance unit became the third company to be stripped of its AAA grade. Without a top-rating stamp, MBIA's business would be crippled and throw ratings on $652 billion of securities into doubt.

MBIA is seeking to convince Moody's Investors Service to retain the highest ranking for its insurance unit as Chief Executive Officer Gary Dunton tries to shore up capital through stock and bond sales.

S&P cut or put on review yesterday the ratings on $534 billion of bonds and collateralized debt obligations tied to home loans made to people with poor credit. Losses from the securities may exceed $265 billion as regional U.S. banks, credit unions and overseas financial institutions write down the value of holdings, S&P said.

Citigroup, the biggest U.S. bank by assets, lost 53 cents to $27.35. Merrill Lynch & Co., the largest U.S. brokerage, declined 59 cents to $55.50.

Amazon, Starbucks

Amazon.com dropped $6.24 to $67.97. Fourth-quarter profit margins contracted because of lower prices and changes in the types of products sold, Chief Financial Officer Thomas Szkutak said. The company forecast full-year operating income of between $785 million and $985 million. Eleven analysts surveyed by Bloomberg estimated operating profit of $1.18 billion.

Starbucks Corp. decreased 87 cents to $18.35. The world's biggest chain of coffee shops said it will open fewer cafes this year and forecast annual profit that trailed analysts' estimates.

Procter & Gamble Co. fell 78 cents to $64.31. The largest U.S. consumer-products company said second-quarter profit rose 14 percent on price increases and higher overseas sales. P&G also said it will separate its Folgers coffee business from the rest of the company.

Bristol-Myers Squibb Co. lost 26 cents to $23. The seller of the anti-clotting pill Plavix posted profit excluding some items that trailed analysts' estimates after taking charges on investments backed by subprime securities.

Europe's Dow Jones Stoxx 600 index lost 1.8 percent, dragged down by financial shares including ING Groep NV and UBS AG. Asian stocks rose after Honda Motor Co. raised its forecast and Hyundai Heavy Industries Co. reported a record profit.