U.S. stock futures sink amid global selloff

U.S. stock futures sink amid global selloff
Blue chip Hewlett-Packard’s shares tumble in the premarket

By William L. Watts, MarketWatch

FRANKFURT (MarketWatch) — U.S. stock futures tumbled Friday, pointing to further losses for Wall Street as global equity markets dropped on fears over global growth and the health of Europe’s banking system.


Futures on the Dow Jones Industrial Average DJ1U
-0.99% dropped 160 points to
10,857. Standard & Poor’s 500 Index futures SP1U
-1.02% declined 18.50 points to
1,125, while Nasdaq 100 futures ND1U
-0.59% lost 29.75 points to trade at 2,052.25.

“I can’t see where the positive news comes from” in the near term, leaving the way open for further selling, said Simon Brown, managing director of Gibraltar-based ProSpreads. But typically low August trading volume has exacerbated market moves in both directions, he said, which could make for heightened volatility through the remainder of the month.

The Chicago Board Options Exchange’s volatility index VIX
+35.12% , widely
known as the market’s “fear index,” rose sharply on Thursday.

Adding to global growth worries, Deutsche Bank on Friday downgraded its forecast for China, saying the slowdown, and even potential for recession, in Europe and the United States now outweighed domestic credit tightening as the biggest risk to China’s economy.

Deutsche Bank economists said a slowdown in growth to a 7% annualized rate in upcoming quarters now appeared more likely.

Meanwhile, economists at J.P. Morgan further cut their forecast for U.S. growth, projecting fourth-quarter gross domestic product to expand by 1% versus a previous projection of 2.5%. They also lowered their forecast for growth in the first quarter of 2012 to 0.5% from 1.5%.

“Declining energy prices should help to cushion some of the weakness in the economy, and the still-low levels of cyclically-sensitive spending could reduce the chances of getting a negative GDP quarter. Nonetheless, the risks of a recession are clearly elevated,” they said, in a research note.

Commodity prices also fell Friday, with the exception of gold. The precious metal continued to soar on safe-haven flows, with December futures hitting yet another record high at $1,881.40 an ounce. December gold GC1Z
+1.86% traded at $1,859.90
in recent action, a gain of $38.

Stocks in focus Friday include Bank of America Corp. BAC
-1.71% . The bank plans to
cut 3,500 jobs this quarter, as it undertakes an aggressive overhaul that could result in the elimination of at least 10,000 jobs, according to a Wall Street Journal report.

Bank of America shares fell 2.3% in premarket trade, while shares of Citigroup Inc. C
-2.43% dropped 2.4%.

Shares of Hewlett-Packard Co. HPQ
-16.16% fell nearly 12% in premarket action.

The company announced after Thursday’s close that it will purchase British software firm Autonomy Corp. PLC UK:AU
+74.51% in a deal valued at more than $10 billion. H-
P shares tumbled in regular trading Thursday after the company cut its sales forecast, announced it was dumping its webOS operations and said it may shed its personal-computer business.

European stocks fell Friday, with banking shares facing another day of heavy selling pressure. European banks led markets to sharp losses on Thursday on concerns about the health of the sector amid exposure to the euro zone’s long-running debt crisis and what’s viewed as a lack of resolve among European leaders to tackle the problems. Read Europe Markets.

Fears that interbank funding could freeze up again due to the ongoing sovereign debt crisis has put heavy pressure on European banks. Read more: Funding worries hammer Europe’s banks.

In Asia, a 6.2% drop for South Korea’s Kospi index KR:0100
-6.22% led markets lower,
with shipbuilders, exporters and financial firms bearing the brunt of the selling pressure. Read Asia Markets.

Against a backdrop of lackluster economic data, a sharp plunge in the Philadelphia Fed’s manufacturing gauge on Thursday extended a rout in U.S. equities. The Dow industrials DJIA
-3.68% ended with a loss of 419.63 points, a decline of 3.7%, to
close at 10,990.58.

The S&P 500 SPX
-4.46% fell 53.24 points, or 4.5%, to close Thursday’s session at
1,140.65, while the Nasdaq Composite Index COMP
-5.22% dropped 131.05 points, or
5.2%, to end at 2,380.43.

William L. Watts is a reporter for MarketWatch in Frankfurt.