Stocks set to extend slide after drop overseas

[September 23, 2010]  NEW YORK (AP) -- Stocks were set to extend their recent slide Thursday following a drop in European markets.

Major European indexes fell after a closely watched reading on business activity in the 16 countries that use the euro declined more than expected. That reignited worries about the strength of Europe's economy as it tries to recover from recession and many countries face debt problems. The euro also dropped against the dollar after the disappointing report.

U.S. traders sold futures on the disappointing overseas news as they await a key reading on domestic employment that will likely eventually have a bigger impact on U.S. trading than the European data. The Labor Department is expected to report first-time claims for unemployment benefits remain at a level that indicates the U.S. economy continues its sluggish growth.

Economists polled by Thomson Reuters predict claims were unchanged last week at 450,000. At that level, employers are not significantly increasing hiring or laying off large numbers of workers.

Claims have fallen consistently in recent weeks reducing worries that the economy might fall back into recession. Modest improvements in many economic reports this month has been enough to drive stocks sharply higher in September. The Dow Jones industrial average has risen in 13 of the past 16 days, though a five-day winning streak was snapped Wednesday when investors took some profits and moved into gold and Treasurys.

A separate report is expected to show sales of existing homes rose about 6 percent in August from a 15-year low in July. The National Association of Realtors is expected to report sales of previously occupied homes rose to an annual rate of 4 million in August.

Ahead of the opening bell, Dow Jones industrial average futures fell 37, or 0.4 percent, to 10,636. Standard & Poor's 500 index futures fell 5.10, or 0.5 percent, to 1,124.70, while Nasdaq 100 index futures fell 5.50, or 0.3 percent, to 1,974.00.

Bond prices rose for the third straight day following as investors increasingly expect the Federal Reserve to restart a bond-buying program to help further stimulate the economy. The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.54 percent from 2.55 percent late Wednesday. Its yield is often used as a benchmark to set interest rates on mortgages and other loans.

Overseas, Britain's FTSE 100 fell 0.7 percent, Germany's DAX index dropped 0.7 percent, and France's CAC-40 fell 0.9 percent. Japanese markets were closed for a holiday.

[Associated Press; By STEPHEN BERNARD]

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