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U.S. Stock Futures Drop as Apple Posts Slowest Profit Since ’03

Jan. 24 (Bloomberg) -- U.S. equity futures fell, signaling the Standard & Poor’s 500 Index will retreat from a five-year high, after Apple Inc. reported the slowest profit growth since 2003 and weakest sales increase in 14 quarters.

Apple, the world’s most valuable company, slid 9.8 percent. Western Digital Corp. also fell, losing 0.8 percent. Netflix Inc. surged 40 percent as the world’s largest online-video service beat its forecast for fourth-quarter subscriber growth and posted an unexpected profit.

S&P 500 futures expiring in March slipped 0.2 percent to 1,487.50 at 8:34 a.m. in New York. The S&P 500 has still climbed 4.8 percent this year. Contracts on the Dow Jones Industrial Average added 5 points, or less than 0.1 percent, to 13,724 today.

“Investors seem to be more focused on the fact that there should be a correction soon rather than on corporate earnings,” said John Plassard, vice president at Mirabaud Securities LLP, in Geneva, which oversees about 25 billion Swiss francs ($26.9 billion). “Apple’s disappointing results don’t help. Sentiment is still solid -- such results from Apple would’ve caused a more radical plunge in the past.”

U.S. stocks rose yesterday, pushing the S&P 500 0.2 percent higher, as lawmakers voted to temporarily suspend the federal debt limit and Google Inc. and International Business Machines Corp. reported better-than-forecast earnings.

U.S. Economy

Equity futures briefly pared losses today as data showed claims for jobless benefits in the U.S. unexpectedly dropped last week. Applications for unemployment insurance payments decreased by 5,000 to 330,000 in the week ended Jan. 19, the fewest since the same week in 2008, the Labor Department reported today in Washington. Economists forecast 355,000 claims, according to the median estimate in a Bloomberg survey.

A separate release might show the index of leading economic indicators, a gauge of the outlook for the next three to six months, climbed 0.4 percent last month after declining 0.2 percent in November.

In China, manufacturing expanded at the fastest rate in two years, according to a survey of companies. The preliminary reading of their purchasing managers’ index rose to 51.9 in January, from 51.5 in December, HSBC Holdings Plc and Markit Economics said today. That compares with the median estimate of 51.7 in a Bloomberg survey. HSBC and Markit will report their final reading for January on Feb. 1.

Apple fell 9.8 percent to $463.88. The results reinforce concern that the company’s growth is being hurt by higher production costs and step up pressure on Chief Executive Officer Tim Cook to demonstrate that Apple has more blockbuster products in the pipeline to reignite sales. The shares have fallen 27 percent since they set a record in September.

Slowing Profit

Profit rose less than 1 percent to $13.1 billion, or $13.81 a share, in the period that ended Dec. 29. Sales rose 18 percent to $54.5 billion, falling short of $54.9 billion, the average analyst estimate compiled by Bloomberg. Analysts had predicted profit of $13.53 a share.

For the fiscal second quarter, which is now under way, Apple forecast sales of $41 billion to $43 billion, compared with predictions by analysts for revenue of $45.5 billion.

“Apple genuinely disappointed people,” Todd Morgan, senior managing director at Los Angeles-based Bel Air Investment Advisors, which manages about $6 billion, said by phone. “The market’s had a terrific run here, so we were looking for some kind of correction and this might be the catalyst.”

Western Digital, a maker of hard drives, retreated 0.8 percent to $46.70, even as it reported fiscal second-quarter sales that beat analysts’ predictions. Net income more than doubled to $335 million, or $1.36 per share, from $145 million, or 61 cents. Analysts had estimated profit of $1.71 a share on sales of $3.65 billion, according to data compiled by Bloomberg.

Netflix Soars

Netflix soared 40 percent to $144.20. The company signed 2.05 million new U.S. Internet subscribers in the fourth quarter, bringing total domestic online customers to 27.2 million, it said yesterday on its website. The gain led to a quarterly profit of 13 cents a share, compared with analysts’ predictions of a loss.

Bristol-Myers Squibb Co. added 0.3 percent to $35. The drugmaker reported fourth-quarter earnings that topped analysts’ estimates after taking a tax benefit for a hepatitis C drug that failed last year.

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