Stock futures drop on global economic worries

[August 24, 2010]  NEW YORK (AP) -- Stock futures retreated Tuesday following the lead of overseas markets as investors worldwide continue to worry about the pace of a global recovery.

U.S. traders are bracing for another disappointing report on the housing market later Tuesday.

Japanese markets led the way lower overnight, falling more than 1 percent as the yen hit a fresh 15-year high against the dollar. Japan's economy relies heavily on exports, so a stronger yen hurts profitability. European markets were also sharply lower.

Investors jumped back into the Treasury bond market as they shunned stocks because of the economic worries. That sent interest rates lower.

The National Association of Realtors is expected to report that sales of previously occupied homes plunged in July to their lowest level in more than a decade. Economists predict sales fell as much as 26 percent in July from a month earlier to a seasonally adjusted annual rate of 3.95 million.

Sales have tumbled since a home buyer tax credit expired at the end of April, despite mortgage rates falling to record lows. Banks have also been selective in giving loans, which could be freezing out many potential buyers.

Home buyers also remain skittish about the value of homes and job concerns remain pervasive adding to the caution. The unemployment rate remains at 9.5 percent and weekly claims for unemployment benefits have consistently risen in recent weeks.

Ahead of the opening bell, Dow Jones industrial average futures fell 71, or 0.7 percent, to 10,086. Standard & Poor's 500 index futures fell 7.80, or 0.7 percent, to 1,057.80, while Nasdaq 100 index futures fell 13.25, or 0.7 percent, to 1,796.25.

Japan's Nikkei stock average fell 1.1 percent. Britain's FTSE 100 fell 1.2 percent, Germany's DAX index dropped 1 percent, and France's CAC-40 fell 1.4 percent.

The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.55 percent from 2.60 percent late Monday. Its yield is often used as a gauge to set interest rates on mortgages and other consumer loans.

The 10-year note's yield continues to hover around levels not reached since March 2009 when the stock market hit a 12-year low and investors were concerned about the deepening recession.

Stocks dropped Monday after early optimism about new corporate dealmaking quickly faded and economic worries again came to the forefront. The Dow lost 39 points Monday.

Reports due out later in the week will also provide insight into the health of the economy. Data on new home sales, durable goods orders, weekly jobless claims and consumer sentiment are scheduled for release later in the week.

Also, the government will release a revised report on second-quarter gross domestic product. The broadest measure of the country's total economic output is expected to be lower than initial thought, adding to concerns about the pace of the domestic recovery.

[Associated Press; By STEPHEN BERNARD]

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