Wall Street futures dropped sharply Thursday ahead of the weekly report on unemployment claims and data on consumer confidence. U.S. stocks fell along with European indices, which sold off widely following a Morgan Stanley warning that the global economy may be on the brink of another recession. Morgan Stanley cut its worldwide growth forecast.
European financials tumbled. That hurt U.S. futures, as did news that the New York Federal Reserve would increase scrutiny of European banks. The move is an attempt to prevent Europe's debt crisis from causing direct damage U.S. financial institutions. Asian stocks also tumbled on economic worries. Japan's exports slowed on a strengthening yen. Big manufacturers were among decliners dragging down the Nikkei.
In market-related news this morning, the Justice Department investigating whether Standard & Poor's improperly rated mortgage securities before the housing market collapse and financial crisis. The investigation began before Standard & Poor's downgrade of U.S. debt.
Economic Data Flood
A flood of U.S. economic news is due out today. At 8:30 a.m. EDT is the eagerly anticipated weekly jobless claims report. As always, economists will be eyeing the all-important 400,000 mark.
Also at 8:30 is July's Consumer Price Index from the Labor Department. With inflation off the table as a big economic concern, analysts expect to see a very small rise in consumer prices. The core number, which strips out volatile food and energy costs, is expected to show an increase of 0.2%, the smallest increase in three months.
The National Association of Realtors will release data on July existing home sales at 10 a.m. Economists expect to see a slight uptick from June, but the numbers are still expected to be dismal.
The Philadelphia Federal Reserve is also on deck at 10 a.m. with its Business Outlook Index for August. Manufacturing activity in the region is expected to show some improvement.
Finally, also at 10 a.m., is the Conference Board's index of Leading Economic Indicators. Despite the name, the report covers July. Economists expect a small increase, as manufacturing indicators are positive, but building permit declines offset that growth.
Looking at commodities trade ahead of today's open, gold reached the $1,800 level and just kept going. The precious metal was up $20.50 per ounce, to $1,814.30. The rise came despite a World Gold Council report that demand for gold fell in the second quarter. Crude oil shed $1.59 per barrel, to $85.99. There's plenty of earnings news to turn investors' heads today.
Before the open, S&P 500 component Ross Stores (ROST), whose shares made solid gains in 2010, is expected to report second-quarter earnings of $1.28 per share on sales of $2.08 billion.
Some eagerly anticipated tech earnings are due out after the bell today. DJIA component Hewlett-Packard (HPQ) is seen reporting income of $1.09 a share on revenue of $31.19 billion. H-P's revenue growth has slowed in the past four quarters, and shares have lost 25.44% so far this year. Ahead of the open, the stock was trading $0.63 lower, down 2.01%, to $30.76.
Cloud-based business software maker Salesforce.com (CRM) is also due out after today's close. Expectations are for earnings per share (EPS) of $0.30 on revenue of $528.78 million. That would be a significant year-over-year revenue gain and an increase of a penny when it comes to earnings. The stock was among the market's best price leaders in 2009 and 2010, but like many others, it has struggled this year.
A stock that has struggled even more is Gap (GPS). The San Francisco-based retailer is slated to report its second-quarter results later today. Wall Street expects earnings per share of $0.33 and sales of $3.35 billion. Gap shares have dropped 25.84%, year to date.
An early price mover was data-storage firm NetApp (NTAP), plunging $5.66, or 13.59%, to $36. Late Wednesday, the company reported disappointing first-quarter earnings results. Earnings growth at NetApp has slowed for four quarters in a row.
Oppenheimer got busy changing ratings in the restaurant sector. McDonald's (MCD), Domino's Pizza (DPZ) and Panera Bread (PNRA) were among companies getting bumped to Outperform from Perform. Not so fortunate were Starbucks (SBUX), Sonic (SONC), Einstein Noah (BAGL) and Texas Roadhouse (TXRH), each of which Oppenheimer downgraded to Perform from Outperform.