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U.S. Stock Futures Drop on China Data, Emerging-Markets Concern

Feb. 20 (Bloomberg) -- U.S. stock futures fell, indicating the Standard & Poor’s 500 Index will decline for a second day, as a report showed Chinese manufacturing shrank amid concern over the prospects for growth in emerging markets.

Facebook Inc. lost 3.3 percent after agreeing to buy mobile-messaging startup WhatsApp Inc. for as much as $19 billion. Wal-Mart Stores Inc. slipped 1.1 percent as the largest retailer forecast profit this year that trailed estimates. Tesla Motors Inc. surged 12 percent after predicting sales of its Model S sedan will jump about 56 percent this year.

Futures on the S&P 500 expiring in March lost 0.3 percent to 1,820.3 at 7:58 a.m. in New York. The gauge had slumped as much as 5.8 percent since reaching a record on Jan. 15 as investor concern about Federal Reserve tapering fueled a rout in emerging markets. It subsequently rose 5 percent from a Feb. 3 low through yesterday’s close. Dow Jones Industrial Average contracts lost 40 points, or 0.3 percent, to 15,976 today.

“At the start of the year, we were looking for a correction and now some of the excessive sentiment has been taken out of the market,” said Kully Samra, who helps manage U.K. clients for Charles Schwab Corp., which has $2.2 trillion of assets globally. “In the short term, it may be a bit of a bumpy ride for China’s economy, given the numbers we’ve seen. The earnings season so far in the U.S. has been OK. The results haven’t been bad, but they haven’t been great either.”

In China, the preliminary February reading of a purchasing managers’ index by HSBC Holdings Plc and Markit Economics was 48.3, trailing the 49.5 projection of economists surveyed by Bloomberg. The figure compares with a final reading of 49.5 in January and is the lowest in seven months. Numbers below 50 mean that activity contracted.

Emerging Markets

“The weakness in equities is to a greater degree due to the uncertainty in the outlook for emerging markets, with China being central as the world’s second-biggest economy,” Keith Bowman, an equity analyst at Hargreaves Lansdown Plc in London. “The economic prospects for the country do remain important for investors.”

Equity futures slumped amid a decline in emerging markets. The MSCI Emerging Markets Index dropped 1.1 percent as at least seven people died in new clashes after a truce declared last night by Ukrainian President Viktor Yanukovych and opposition leaders foundered.

Fed Minutes

The S&P 500 slid 0.7 percent yesterday as minutes from the Fed’s January meeting showed policy makers may soon change their guidance for interest rates as unemployment falls toward a threshold for considering an increase in borrowing costs. Several officials also said that, barring an “appreciable change in the economic outlook,” they would favor reducing the pace of bond purchases by $10 billion at each meeting.

Hewlett-Packard Co. and 17 other companies report results today. Of the more than 420 S&P 500 companies that have posted earnings so far this season, about 74 percent have exceeded earnings estimates and 63 percent have beaten sales projections, according to data compiled by Bloomberg.

Facebook slipped 3.3 percent to $65.80 as the world’s biggest social network said it will pay $12 billion in stock, $4 billion in cash and $3 billion in restricted shares for WhatsApp. It is the largest Internet deal since Time Warner’s $124 billion merger with AOL in 2001, according to data compiled by Bloomberg.

Wal-Mart dropped 1.1 percent to $74 after predicting earnings from continuous operations for the year through January 2015 of $5.10 to $5.45 a share. Analysts on average had estimated $5.55 apiece. The world’s largest retailer announced a dividend of 48 cents a share, missing analysts’ projections for 51 cents a share.

Apple Retreats

Apple Inc. fell 1 percent to $532. The iPhone maker’s market share in China declined to 7 percent in the fourth quarter from 9 percent a year earlier, Canalys said in an e- mailed statement. Samsung Electronics Co. maintained its lead over competitors as it increased its market share to 19 percent from 17 percent, the research firm said.

Allegion Plc dropped 1.2 percent to $48.56 after saying costs from restructuring and spinoffs will reduce earnings by 25 cents to 30 cents a share in 2014. North America’s biggest maker of locks posted fourth-quarter profit of 58 cents a share on sales of $550.6 million. Analysts on average had forecast earnings of 59 cents a share and revenue of $568.3 million.

Safeway Inc. added 4.8 percent to $36.27 as it considers a sale. CVC Capital Partners Ltd. and Leonard Green & Partners LP are among the firms in talks with Safeway about buying some or all of the grocery chain as it weighs a sale, people with knowledge of the matter said.

The second-largest U.S. grocery-store chain said it plans to distribute its remaining 37.8 million shares of the Blackhawk Network Holdings Inc. gift-card business to Safeway investors and explore ways to monetize its 49 percent stake in Mexican retailer Casa Ley SA.

Tesla jumped 12 percent to $217.55. The electric-car maker said Model S deliveries will increase to 35,000 this year as sales to China begin, from about 22,450 last year. Tesla posted fourth-quarter earnings of 33 cents a share excluding some items, exceeding the 26-cent average of analyst estimates compiled by Bloomberg.

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