Wall Street to tumble after China, Fed prompt fears
U.S. stock futures tumbled on Thursday despite a drop in jobless claims as concerns that the Fed would begin tapering its bond buying program in the near term and weak Chinese manufacturing data combined to hurt investor sentiment.
Futures on the three main U.S. market indexes were down between 0.7% and 0.9% this morning, as of 8:34 am ET.
On Wednesday, stocks swung wildly, first rising sharply and then falling, with the Dow and the S&P 500 ending over 80 points and 13 points lower, respectively.
Fed chairman Ben Bernanke said in his testimony yesterday to the Joint Economic Committee of Congress that any premature tapering of the bond purchasing policies could threaten the economic recovery, leading to a rally, but when pressed for more details by officials, he said the easing of the program could occur in the "next few meetings".
This, combined with minutes from the central bank's April 30-May 1 meeting released later in the afternoon that showed some officials were advocating for the tapering of the bond purchasing as early as June, led to a decline in equities.
The Fed concerns, along with the China data, which saw the HSBC flash version of the PMI index for May fall to a seven month low of 49.6, weighed on Asian equities and led to stock turmoil around the globe.
The Nikkei Stock Average (TYO:JP:NIK) closed down 7.3%, its worst single-day loss since March 2011. Ten-year Japanese government bond yields also surged to their highest level in more than a year, causing the Bank of Japan to offer 2 trillion yen in funds.
In U.S. economic data, weekly jobless claims dropped by more than expected, by 23,000 to 340,000 for the week that ended May 18. Economists expected jobless claims to fall to 343,000. Claims in the previous week were also revised higher, to 363,000 from 360,000, which was already a surprising spike that put jobless claims at a one and a half month high.
Other data on tap today include the Federal Housing Finance Agency's home-price report for March, as well as Markit's flash manufacturing purchasing managers index for May at 9:00am ET.
New single family home sales for April are due at 10:00am ET, and are expected to rise to an annual rate of 430,000.
In corporate news, shares of Hewlett-Packard (NYSE:HPQ) jumped more than 10% premarket, as despite reporting a sharp decline in profit, its second quarter results and outlook topped market views.
Ralph Lauren (NYSE:RL) shares dropped more than 3.6% after the company's quarter profit topped views, but sales fell short of estimates.
Oil futures for July delivery fell sharply amid the stock market rout, down $1.45 to $92.83 a barrel, while gold futures surged $26.5 to $1,393.90 an ounce.
European markets were also sharply lower today with shares in Germany off the most. The DAX was lately down 2.53% in early afternoon trade while France's CAC 40 was off 2.46% and Britain's FTSE 100 shed 1.79%.