Stocks headed for a sell-off

August 18, 2011: 9:04 AM ET
premarkets

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NEW YORK (CNNMoney) -- U.S. stocks were headed for a sell-off Thursday, tracking steep declines across world markets and pushing gold to a new record.

Investors were hit with bad news on various fronts, after Morgan Stanley cut its forecast for global economic growth, and the U.S. government issued disappointing reports on inflation and the job market.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were down nearly 2% ahead of the opening bell. Stock futures indicate the possible direction of the markets when they open at 9:30 a.m. ET.

A gloomy report from Morgan Stanley intensified fears over a slowing global economic recovery. The investment banks slashed its global growth outlook for 2011 and 2012, adding that the United States and Europe are "hovering dangerously close to a recession."

Morgan Stanley cut GDP forecasts to 3.9% in 2011 and 3.8% in 2012, down from 4.2% and 4.5%, respectively. Growth will be particularly sluggish in developed nations, with GDP averaging an increase of 1.5%

"The fact that Morgan Stanley has downgraded its global growth forecast really highlights the concerns and problems facing the global economy," said Michael Hewson, market analyst at CMC Markets in London. "It begs investors to question where future growth will come from."

Trading slows afer week of market mayhem

"I think we're seeing a bit of a delayed reaction to the Sarkozy and Merkel meeting earlier this week, as investors realize that policymakers are out of ideas," Hewson said, noting that an unnamed bank tapped the European Central Bank's emergency liquidity fund for $500 million overnight.

Stock futures headed even lower, after the government issued weak reports on initial jobless claims and consumer prices.

U.S. stocks ended a thinly traded session mixed Wednesday, as investors weighed the latest corporate results against global economic and debt concerns.

Economy: Investors received an unpleasant surprise, when the Labor Department reported that weekly jobless claims were worse than expected.

The government reported that jobless claims rose by 9,000 to 408,000 in the week ended Aug. 13. Economists surveyed by Briefing.com had forecasted a rise of 5,000 to 400,000 claims.

Americans paid more for consumer goods and services in July, as inflation rose more than expected over the month. The Consumer Price Index, rose 0.5% in the month -- led by a 4.7% increase in gas prices from month to month.

Economists expected a 0.2% rise in July, according to a survey from Briefing.com.

At 10 a.m. ET, investors will get July existing home sales, the August Philadelphia Fed index and July leading economic indicators.

Existing home sales are expected to rise 2%. The Philadelphia Federal Reserve's manufacturing index is expected to fall to 1.0 in August, from 3.2 the previous month. Leading economic indicators are expected to edge up 0.2%.

Rating agency Standard & Poor's is being investigated by the U.S. Justice Department, for allegedly overrating mortgage-backed securities. The mortgage securities meltdown led to the 2008 financial crisis, according to a report published Thursday.

Euro bonds: Magic bullet for debt crisis?

World markets: European stocks were sharply lower in morning trading. Britain's FTSE (FTSE) 100 fell 2.5%, the DAX (DAX) in Germany sank 3.6% and France's CAC (CAC) 40 tumbled 2.9%.

Asian markets ended the session in the red. The Shanghai Composite fell 1.6%, the Hang Seng in Hong Kong dropped 1.3% and Japan's Nikkei shed 1.3%.

Companies: Dow component Hewlett Packard (HPQ, Fortune 500) reports its quarterly results after the closing bell on Thursday. Analysts are looking for the tech giant to post a profit of $1.09 per share.

The stock price for Sears Holdings (SHLD, Fortune 500) fell more than 2% in premarket trading, after the retailer reported a disappointing quarterly loss of $1.13 per share.

Currencies and commodities: Concerns about a global slowdown sparked a flight to safety assets, including the dollar and gold.

Gold futures for December delivery rose $25.30 to $1,821.80 an ounce, hitting a new intraday record.

The greenback gained strength against the euro, Japanese yen and the British pound.

Oil for September delivery plunged $2.68 to $84.90 a barrel.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.10% from 2.16% late Wednesday.  To top of page

Index Last Change % Change
Dow 16,804.71 -238.19 -1.40%
Nasdaq 4,422.09 -71.31 -1.59%
S&P 500 1,946.16 -26.13 -1.32%
Treasuries 2.40 -0.10 -4.19%
Data as of 7:26am ET
Company Price Change % Change
Bank of America Corp... 16.82 -0.23 -1.35%
Ford Motor Co 14.59 -0.20 -1.35%
Facebook Inc 76.55 -2.49 -3.15%
Apple Inc 99.18 -1.57 -1.56%
Cisco Systems Inc 25.03 -0.14 -0.56%
Data as of Oct 1
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15 yr fixed3.23%3.21%
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15 yr refi3.28%3.21%
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