Futures Slide as Weak China Data Add to Fed Gloom


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U.S. stock-index futures joined a global selloff Thursday after an unexpected contraction in China's manufacturing sector added to concerns about when the Fed will begin tapering its bond-buying program.

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Today's Markets

As of 8:36 a.m. ET, Dow Jones Industrial Average futures fell 119 points to 15200, S&P 500 futures dropped 15.3 points to 1640 and Nasdaq 100 futures skidded 26.3 points to 2975.

Mounting concerns about the global economy and central bank easing have shaken what appeared to be unshakable investor confidence. The Japanese Nikkei 225 plunged 7.3% overnight in its worst rout in two years on the back of an uncharacteristically weak U.S. session. European markets followed suit later in the morning, with benchmark indexes in the UK, Germany and France all sliding more than 1.5%.

Chris Beauchamp, a market analyst at IG, pointed to a range of factors for the sudden lurch lower in equities. He said minutes Wednesday from the Federal Reserve, combined with commentary from Fed chief Ben Bernanke and weak China data created a toxic combination for the markets.

Still, Dan Greenhaus, chief global strategist at BTIG, said the big selloff should be taken in context: "Japanese equities were higher by over 70% since November and while the decline in one day was quite large, it still represents just 10% of the overall move," he wrote in an e-mail.

Gloomy China Data Spark Growth Worries 

China's manufacturing sector unexpectedly contracted in May, according to a report from HSBC. The bank's gauge fell to 49.6 for the month, from 50.4 the month before, compared to expectations that it would hold steady. Readings above 50 point to expansion, while those below indicate contraction.

"The cooling manufacturing activities in May reflected slower domestic demand and ongoing external headwinds," Hongbin Qu, the bank's chief economist for China wrote in the report. "A sequential slowdown is likely in the middle of [the second quarter], casting downside risk to China’s fragile growth recovery."

Meanwhile, on the U.S. front, the Labor Department said new claims for unemployment benefits fell to 340,000 last week from an upwardly-revised 363,000 the week prior. Claims were expected to fall to 345,000 from an initially-reported 360,000.

Sales of new,single-family homes are expected to have risen to an annual rate of 425,000 units in April from 417,000 in March. The market for new homes has recovered recently, but the gains have been choppy.

Oil futures came under pressure. The benchmark U.S. contract fell $1.04, or 1.1%, to $93.25 a barrel. Wholesale New York Harbor gasoline dipped 0.47% to $2.806 a gallon.

In metals, gold jumped $23, or 1.7%, to $1,390 a troy ounce. Traders bid up safe-haven U.S. debt, sending the yield on the 10-year falling 0.049-percentage point to 1.997%.

In corporate news, Hewlett-Packard (NYSE:HPQ) shares surged after the struggling PC maker posted better-than-expected quarterly profits and a rosy outlook. Results from Gap (NYSE:GPS) and Pandora (NYSE:P) are due out after the closing bell.

Foreign Markets 

The Euro Stoxx 50 sold off by 2.2% to 2773, the English FTSE 100 dropped 1.8% to 6716 and the German DAX slid 2.4% to 8324.

In Asia, the Japanese Nikkei 225 plunged 7.3% to 14484 and the Chinese Hang Seng plummeted 2.5% to 22670.

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