Stock futures point to more selling
NEW YORK — Futures pointed to further selling today after major stock indexes posted their biggest drop in more than a year and pushed the market to “correction” mode.
Investors again looked to Europe for direction. The lower house of Germany’s parliament approved its share of a $1 trillion plan to help contain debt problems in Europe but major European stock indexes fell more than 1 percent.
The euro rose to $1.2507 from $1.2465. The 16-nation currency has been a big driver of trading for weeks but many traders have been skeptical that any advances will be short-lived.
World markets have been falling on concerns that European debt problems will upend a global rebound. The Dow Jones industrials tumbled 376 points yesterday. The Dow and broader indexes are now in correction territory by having dropped more than 10 percent from their 2010 highs last month.
Dow futures fell 103, or 1 percent, to 9,953. Standard & Poor’s 500 index futures fell 11.60, or 1.1 percent, to 1,058.40. Nasdaq 100 index futures fell 17.50, or 1 percent, to 1,783.00.
Bond prices rose, extending yesterday’s gains when investors dumped anything seen as risky, including stocks and commodities. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.18 percent from 3.22 percent late yesterday.
Crude oil dropped 60 cents to $70.20 per barrel in electronic trading on the New York Mercantile Exchange. Gold prices fell.
Friday’s trading could see added fractiousness because of the expiration of options contracts.
A slide at the open could push the Dow below the psychological benchmark of 10,000. The index fell below that level on May 6, when it lost nearly 1,000 points in an afternoon rout that was the biggest ever intraday slide. Regulators have said they are still unclear what caused the brief drop.
Traders also will be focusing on the level of 1,065.79 in the S&P 500. That was the low for the index during the so-called “flash crash” this month. Beyond that, traders will be watching to see whether the index can hold above its 2010 closing low of 1,056.74 from Feb. 8.
Even with the drop of 12 percent from its 2010 high, the S&P 500 index is still up 58 percent from the March 2009 bottom and is down 31.5 percent from its record close of 1,565 in October 2007.
Corrections can be scary but they can be good for markets. Analysts say major stock indexes had become overheated in their climb from a 12-year low in March 2009. Corrections also aren’t unusual. Drops of 10 percent occur in most years and don’t necessarily that stocks will keep sliding.
“We don’t think there is any predictability that just because we’ve had a 10 percent correction now that suddenly we’re in for another 10 percent drop,” said Bill Urban, principal with Bingham, Osborn & Scarborough, based in San Francisco.
Financial stocks are also drawing attention. The Senate late yesterday approved its version of a financial overhaul bill that contains the biggest regulatory changes for banks since the 1930s. The bill will now be reconciled with a version that passed the House.
In afternoon trading, Britain’s FTSE 100 fell 1.6 percent below the psychological threshold of 5,000. Germany’s DAX index slid 2.2 percent, and France’s CAC-40 fell 1.8 percent. Earlier, Japan’s Nikkei stock average fell 2.5 percent.
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