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Stock futures fall sharply on Portuguese, Italian woes

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[July 10, 2014]  NEW YORK (Reuters) - U.S. stock index futures fell sharply on Thursday as European shares tumbled on growth concerns after weak data out of Italy and concern over the health of Portugal's top listed bank.

With U.S. stocks trading near record highs, the selloff in Europe will probably raise red flags and entice shorts who have been shut out of the market. Many market participants have called for a pullback, with the steady S&P 500 yet to see a daily decline of 1 percent or more since April 10.

Espirito Santo Financial Group <ESF.LS>, the largest shareholder in Portugal's Banco Espirito Santo <BES.LS>, suspended trading in its shares and bonds, citing "material difficulties" at parent company ESI. Shares of the bank fell 17.2 percent.

Italian industrial output dropped 1.2 percent month-on-month in May, its steepest monthly fall since November 2012, casting doubt over prospects for the country's economic recovery.

Portugal's main stock index fell 4.5 percent and Italy's FTSE MIB fell 2.6 percent. An index of European bank shares was down 2.8 percent. U.S. banks will likely fall on concerns over exposure to Europe.

S&P 500 e-mini futures were down 17 points and fair value - a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract - indicated a lower open. Dow Jones industrial average e-mini futures fell 138 points and Nasdaq 100 e-mini futures lost 33 points.

The CBOE Volatility Index is expected to snap higher after a period of little movement. The VIX last week hit its lowest level since early 2007. The VelocityShares Daily 2x VIX Short Term exchange-traded note rose 8.2 percent in active trading.

Traders will look out for U.S. jobless claims data, due at 8:30 a.m. EDT, while wholesale inventories and sales are due at 10:00 a.m.

Shares of Lumber Liquidators <LL.N> fell 21.5 percent in premarket trading a day after the hardwood flooring retailer cut its earnings outlook.

(Reporting by Rodrigo Campos; Editing by Bernadette Baum)

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