U.S. stock index futures slide to three-month lows
CHICAGO, July 10 (Reuters) - U.S. stock index futures Tuesday sank to their lowest settlements since mid-April, with the Nasdaq 100 index futures bearing the brunt of the losses on dealer selling fueled by worries about corporate earnings.
``There is an atmosphere of continued (earnings) warnings and layoffs,'' one stock index futures trader said. ``It's very cloudy and the trend is definitely down.''
The Chicago Mercantile Exchange's September Nasdaq 100 stock index futures contract ended just off its session low of 1,634.00, a level not seen since April 10.
The Nasdaq 100 contract struggled to rally throughout the day in whipsaw trading, but any bids to the upside were thwarted by dealer and local selling and the absence of a compelling catalyst to entice buying, analysts and traders said.
Even though the lead-month Standard & Poor's (S&P) 500 stock index futures managed to fend off heavy losses, it closed at its session low of 1,186.00, revisiting a three-month low.
U.S. stock index futures kicked off the day on a strong note, extending their overnight gains and rising near the open of pit trade, and initially brushing off news of job cuts and a large second-quarter charge at Corning Inc. (NYSE:GLW - news), the world's biggest maker of fiber-optic cable. But by mid-morning, the rally fizzled and trading whipsawed sideways to lower.
``The market still does not have the ability to have any type of bid going,'' one trader said. ``Dealers were good sellers most of the early morning. One institution was a good seller at around 1,202.00-1,204.00 and sold 1,000 S&P contracts.''
``It is ugly ... The market tried to get up on the opening and it fell through,'' said Peter Blatchford, head of proprietary trading at Miller Tabak & Co. ``It is tough. It is summertime, and slow markets tend to be down markets.''
The futures turned mixed around midday, with a negative bias, and then sold off in the afternoon with the Nasdaq 100 stock index futures pacing the declines.
Locals were short and got an added boost to their cause by some institutions, another trader said.
``People are on edge,'' said Pat O'Hare of Briefing.com. ``The market is like a deer caught in the headlights. It does not know which way it should be going.''
On the one hand, supportive action by the U.S. Federal Reserve, which has so far this year sliced interest rates by 2.75 percentage points, should augur well for stocks.
``Yet that is not happening,'' O'Hare said. On the other hand, ``news from Corning Inc. was quite disconcerting, because to this point, the bullish argument has been that you would have a rebound in earnings prospects by the end of the year.''
``Given the current environment, (Corning's problems are) an acknowledgment that the telecom market is not likely to rebound for another 12 to 18 months,'' O'Hare said. ``It does lead people to question whether they have gotten ahead of themselves, pricing in an economic rebound by the end of the year.''
Investors may be giving up and ``getting out'' on the belief that if they wait that long for a recovery, they might as well have cash, Blatchford said.
In other corporate news, French telecommunications equipment maker Alcatel (NYSE:ALA - news) said on Monday it would cut an additional 2,500 jobs in the United States, or 16 percent of its U.S. work force, and close a facility in North Carolina in a bid to cut costs during the economic slowdown.
On top of that, Deutsche Banc Alex. Brown said Tuesday it expects mobile and fixed wireless equipment firms to report dismal results for the June quarter as wireless telephone and infrastructure firms are hit by slowdowns in their respective sectors.
September S&P's dropped 13.70 to 1,186.50, Dow futures lost 113 points to close at 10,208, Nasdaq 100s tumbled 62.00 to 1,638.00, Russell 2000s were off 9.10 to 478.65, Midcap 400s dropped 6.50 to 499.25, and Nikkei 225s plunged 140.0 to 12,140.0.
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