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U.S. stock futures slumped modestly Tuesday morning amid deepening worries about Europe’s ability to halt its worsening sovereign debt crisis and avoid a double-dip recession.
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As of 8:47 a.m. ET, the Dow Jones Industrial Average futures lost 71 points, or 0.59%, to 11989, the Standard & Poor's 500 futures declined 8.50 points, or 0.68%, to 1244.00 and the Nasdaq 100 slid 9.50 points, or 0.41%, to 2333.50.
However, the premarkets pared their losses after the U.S. government released a slew of economic indicators that beat expectations, highlighted by the strongest jump in core retail sales since March and a rare increase in NY-area manufacturing activity.
The upbeat economic headlines weren't enough to completely drown out Wall Street's euro-zone headache, which was highlighted by the yield on Italy’s 10-year bond soaring above the scary 7% level.
The early weakness puts Wall Street on track to suffer a second-straight day of losses. Hurt by concerns about the crisis in Europe, the blue chips slumped 75 points on Monday, leaving them up just over 4% on the year.
“It’s clear that European debt issues are paralyzing investing decisions, a rational response it seems as the unprecedented nature of what is ailing us can't be modeled,” Peter Boockvar, managing director at Miller Tabak, wrote in a note.
For signs of the crisis of confidence in Europe, look no further than the rising yield needed to draw investors to Italy, the euro-zone’s third-largest economy. The yield on the Italian 10-year bond once again crept above the 7% mark, a psychologically-important level that previously shut Greece and Ireland out of the bond market. Traders have feared that Italy, which is too big to bail out, will ultimately be unable to tap the capital markets and be forced to default, triggering a significantly deeper crisis.
European policymakers have been scrambling to build a pair of rescue funds aimed at shoring up investor confidence and preventing troubled euro-zone nations from defaulting (bringing European banks with them).
However, talks to increase the lending capacity of the European Financial Stability Facility, a $600 billion rescue fund, have yielded no real progress due to major disagreements, The Wall Street Journal reported. Likewise, efforts to speed up the adoption of the European Stability Mechanism, a permanent bailout fund, to mid-2012 is also unlikely to happen, the paper reported.
While European policymakers race to create credible solutions, the euro-zone is brushing up against a double-dip recession. New data released on Tuesday show euro-zone gross domestic product inched up just 0.2%, down from 1.4% the year before. That growth matched expectations, but also underscores fears the euro-zone may already be in the midst of a double-dip recession.
With that backdrop in mind, the closely-watched euro dropped 0.55% to $1.3550.
Domestic Earnings, Data Offset Euro Woes
Back on the other side of the Atlantic, U.S. traders received a flurry of mostly positive economic reports indicating the American economy is doing much better than Europe's.
With the holiday shopping season looming, the Commerce Department said retail sales climbed 0.5% in October, beating forecasts for a rise of 0.3%. Excluding autos, retail sales jumped 0.6% -- the strongest performance in seven months. Electronics/appliance store sales registered their biggest rise in almost two years, soaring 3.7%.
Economic sentiment was also boosted by the New York Fed's Empire State manufacturing index, which rose to 0.61 in November, up from -8.48 in October. That marked the first positive print on this regional indicator since May.
The Commerce Department also said U.S. producer prices shrank by 0.3% last month, cooler than the 0.1% estimate from economists and well off September's 0.8% rise. Excluding food and energy, PPI was unchanged, compared with estimates for a rise of 0.1%.
On the earnings front, shares of Wal-Mart (NYSE:WMT) slumped more than 1% as the world’s largest retailer reported slightly weaker-than-expected third-quarter earnings of 97 cents a share. For the all-important holiday shopping season, Wal-Mart projected EPS of $1.42 to $1.48, compared with estimates for $1.45.
On the other hand, shares of Home Depot (NYSE:HD) climbed more than 1% as it beat the Street with third-quarter earnings of 60 cents a share on revenue of $17.33 billion. The results led the home improvement retailer to boost its dividend by 16%.
The commodities complex slipped a bit in early trading. Crude oil fell 8 cents a barrel, or 0.08%, to $98.14. Gold declined $4.90 a troy ounce, or 0.28%, to $1,773.50.
The U.K.’s FTSE 100 dropped 1.02% to 5462.65, Germany’s DAX slumped 1.96% to 5867.78 and France’s CAC 40 tumbled 2.08% to 3044.18.
In Asia, Japan’s Nikkei 225 lost 0.72% to 8541.93 and Hong Kong’s Hang Seng slid 0.82% to 19348.40.