U.S. Stock-Index Futures Fall; Goldman, Merrill Shares Decline

Dec. 4 (Bloomberg) -- U.S. stock-index futures dropped after JPMorgan said deteriorating debt markets will reduce earnings at Wall Street's four biggest securities firms through next year.

Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. fell after JPMorgan analysts said the brokerages may write down debt-related holdings in the fourth quarter. Brokerages also declined after Punk Ziegel & Co. analyst Richard Bove advised selling shares of Bear Stearns Cos., Goldman and Lehman.

Standard & Poor's 500 Index futures expiring in December retreated 8.1 to 1,467.4 as of 8:33 a.m. in New York. Dow Jones Industrial Average futures lost 67 to 13,282. Nasdaq-100 Index futures slid 15.5 to 2,059.5. Benchmark indexes in Europe and Asia also fell.

U.S. benchmark indexes declined for the first time in five days yesterday after Deutsche Bank AG analyst Mike Mayo said bond losses will hurt brokerage profits. Financial companies, which account for 18 percent of the S&P 500's value, have tumbled 17 percent as a group this year as securities firms and banks announced more than $50 billion of writedowns for mortgage-related assets.

Goldman, Sachs & Co. strategists today reduced their earnings estimates for companies in the S&P 500 to account for profit shortfalls in the banking industry.

Brokerages Slump

Goldman, the world's largest securities firm by market value, dropped $5.89 to $221. Morgan Stanley slipped 53 cents to $51.75. Merrill declined 91 cents to $58.15. Lehman dropped $1.38 to $60.

Slumping credit markets will reduce the securities firms' earnings from debt underwriting and advising on mergers and acquisitions, JPMorgan analysts led by Kenneth Worthington wrote in a research note. The declining value of some debt securities including collateralized debt obligations held by the brokerages may force them to report further writedowns in the fourth quarter, Worthington wrote.

Punk Ziegel's Bove reduced his rating on shares of Bear Stearns, Goldman and Lehman to ``sell'' from ``market perform.''

ConocoPhillips, the third-biggest U.S. oil company, slid 11 cents to $80.14 in Germany. Exxon Mobil Corp., the largest energy company, dropped 34 cents to $88.51.

Crude oil fell after an OPEC delegate said the group would discuss a production increase at its meeting tomorrow. The contract for January delivery slid as much as 96 cents, or 1.1 percent, to $88.35 a barrel in New York.

Michael Moran, Abby Joseph Cohen and Michelle Kim, who are part of Goldman's New York-based research team, reduced their prediction for per-share profit growth this year to 0.7 percent, down from 4 percent previously. Earnings in 2008 will increase 5.6 percent for companies in the benchmark, down from an earlier estimate 7.5 percent growth, according to the report.