Thursday February 7th

7-02-2019

Dow set to fall more than 150 points as weak euro zone forecast sparks fears of slowing growth

U.S. stock index futures fell on Thursday as a cut in the euro zone growth forecast reignited fears that the global economy may be slowing down. At around 7:16 a.m. ET, Dow Jones Industrial Average futures pointed to a drop of 163 points at the open. S&P 500 and Nasdaq 100 futures also indicated solid drops at the open. The European Commission slashed its growth outlook for the euro zone this year as it expects the bloc’s largest economies to be held back by global trade tensions, among other issues. The Commission said euro zone growth will slow to 1.3 percent this year from 1.9 percent in 2018, before rebounding in 2020 to 1.6 percent. That growth outlook sparked worries that the global economy could be slowing down. Similar fears contributed to the market’s sharp downturn in December. That decline briefly sent the S&P 500 into bear-market territory on an intraday basis. Thursday’s decline comes as the corporate earnings season continues. Twitter reported quarterly earnings that beat analyst expectations on Thursday. However, shares of the social media company fell more than 7 percent as Twitter also issued light guidance. Fiat Chrysler and Cardinal Health are also among the companies that reported better-than-expected earnings. Companies are reporting solid earnings growth for the fourth quarter with profits showing an increase of 14.1 percent on a year-over-year basis, according to Factset. However, the outlooks accompanying those earnings reports are not as rosy. Because of those poor forecasts, earnings for the first quarter of 2019 are expected to drop more than 1 percent, according to FactSet. That’s the first year-over-year decline in earnings in more than two years. The S&P 500 snapped a five-day winning streak on Wednesday following the release of mixed quarterly results. The broad index — even though it has rallied sharply from its December lows — is still trading below its 200-day moving average, a widely followed technical level. “The S&P 500 recovery has extended to key resistance from its 200-day average and late 2018 highs at 2742/2815. We look to fade the recovery here, and for this to define the top of a potentially lengthy sideways range,” said David Sneddon, managing director at Credit Suisse, in a note. Stocks in Asia were mixed on Thursday, with U.S.-China trade hopes up as negotiations are set to continue. Japan’s Nikkei 225 slipped 0.59 percent to close at 20,751.28 while the Topix declined 0.83 percent to finish its trading day at 1,569.03. South Korea’s Kospi closed largely flat at 2,203.42. Oil prices fell on Thursday after U.S. crude inventories rose and the country’s production held at record levels, but OPEC-led supply cuts and Washington’s sanctions against Venezuela supported markets. U.S. West Texas Intermediate (WTI) crude futures were at $53.66 per barrel at 0744 GMT, down 35 cents, or 0.7 percent, from their last settlement. International Brent crude oil futures fell 39 cents, or 0.6 percent, to $62.30 per barrel.