U.S. Stock Futures Slump on Global Selloff
NEW YORK — U.S. stock futures slumped as part of another global selloff, with continued volatility in emerging-market stocks and currencies prompting investors to flee riskier assets.European markets also sank, with the Turkish lira slumping to another record low against the dollar. The Russian ruble also hit a record low against the euro. Brazil’s currency also fell in early trading.
The iShares MSCI Emerging Markets exchange-traded fund dropped 1.4% in premarket trading, after falling 2.5% on Thursday to close at a 4 1/2-month low.
About 90 minutes ahead of the open, Dow Jones Industrial Average futures slid 95 points, or 0.6%, to 16056. On Thursday, the Dow slumped 176 points, or 1.1%, to close at a one-month low, as disappointing data out of China sparked a selloff.
S&P 500 index futures dropped 12 points, or 0.7%, to 1812 and Nasdaq 100 futures shed 22 points, or 0.6%, to 3592. Changes in stock futures don’t always accurately predict stock moves after the opening bell.
Assets seen as safe havens continued to benefit. Gold futures gained 0.7% to $1,270.80 an ounce, extending Thursday’s rally to a two-month high. Treasury prices advanced further, with the yield on the 10-year Treasury note falling to 2.732%, after settling at seven-week low of 2.774% on Thursday. Treasury yields decline as prices rise.Joseph Quinlan, chief market strategist at U.S. Trust, Bank of America Private Wealth Management, with $333 billion in assets under management, said the volatility in the emerging markets is a worry for the U.S., as that total market segment accounts for a large chunk of global economic growth.
“They are big players, not bit players, so this is a big deal for everyone,” Mr. Quinlan said of economies dubbed emerging. “The rumblings in the emerging markets can create their own momentum. It’s a cascading effect.”
Although this volatility could remain a problem for the short term, he said longer-term investors shouldn’t be too concerned because the problems are coming from outside the U.S., which actually makes U.S. assets more attractive.
“We’re telling clients, this is a problem, but if there is a big sliver lining, it means more demand for the [U.S.] assets they already own,” Mr. Quinlan said. “If we got a 5% to 8% pullback, we’ll be putting more money to work in equities.”The S&P 500 closed Thursday 1.1% below its Jan. 15 record high close of 1848.38.
Worries about emerging markets overshadowed a 2.9% premarket jump in the shares of Dow component Microsoft Corp. The software giant reported late Thursday fiscal second-quarter earnings and revenue that exceeded expectations, boosted by strong demand for the company’s new Xbox videogame console.
Also in the Dow, Procter & Gamble tacked on 0.6% after fiscal second-quarter core earnings came in slightly above estimates, and the company said it was on track to meet its full-year earnings and revenue growth projections.
There were no major economic data scheduled for release in the U.S.
In Europe, the Stoxx Europe 600 dropped 1.5%, adding to Thursday’s 1% slid. Germany’s DAX 30 index lost 1.2%, France’s CAC 40 gave up 1.4% and the U.K.’s FTSE 100 dropped 0.9%.“The jury is still out on whether yesterday’s selloff was caused by U.S. data, poor corporate earnings or the Chinese purchasing managers’ index,” said Jim Reid, a strategist at Deutsche Bank. “Whatever the reason, the real damage was in done in emerging markets.”
“All this provides a fairly nervous lead-in to next week’s Federal Reserve meeting where the consensus appears to be that another $10 billion in tapering will result,” Mr. Reid said.
The Fed announced in December it would begin this month to taper what had been an $85-billion-a-month bond-buying program by $10 billion.
Asian markets got the selloff going again on Friday, highlighted by the 1.9% tumble in Japan’s Nikkei Stock Average. Hong Kong’s Hang Seng slumped 1.3%, while China’s Shanghai Composite bucked the trend by rising 0.6%.
– WALLSTREET JOURNAL