More woes for Wall Street
Major gauges set to open sharply lower after China selloff and surprising uptick in key inflation gauge.
NEW YORK (CNNMoney.com) -- Turbulence in overseas markets and a bigger-than-expected inflationary reading put U.S. stocks on a course for a sharply lower open Thursday, despite reports of some deals that could provide some support.
At 9 a.m. ET, Nasdaq and S&P futures were down sharply after being solidly higher in the early trading.
Stock futures moved lower after a government report revealed that consumers' income and spending rose more than expected in January, while a closely watched inflation measure showed an unexpected increase.
The core PCE deflator, a closely watched inflation measure favored by Federal Reserve policy makers, came in at an annual increase of 2.3 percent, compared to the 2.2 percent rise in December.
It is generally assumed that the central bank policymakers are comfortable when that measure is up between 1 to 2 percent.
Jobless claims also climbed unexpectedly last week, hitting 338,000, its highest level over a year.
Asian markets retreated again Thursday, with the Chinese markets that triggered this week's bear run resuming their decline. European markets, which also had been higher in early trading, were mostly lower as well.
In related news, Japan's top financial diplomat said he expected Japanese interest rates to rise further and urged investors to recognize the risk in high-leverage carry trades
Treasury prices rose as stock futures fell, taking the yield on the 10-year note to 4.52 percent from 4.57 percent late Wednesday. The dollar was stronger against the euro but sharply lower against the yen.
Economic reports due out later Thursday include a survey of manufacturing executives by the Institute of Supply Management at 10 a.m. ET, which will be one of the first looks at economic conditions in February.
The ISM index is forecast to edge up to 50, the tipping point between growth and contraction in the sector, after a 49.3 reading in January.
Also at 10 a.m. will be a reading on construction spending.
"There's going to be plenty for us to consider between now and 10 a.m.," said Art Hogan, chief market analyst at Jefferies & Co.. Hogan said stocks could also get a lift from a number of deal reports.
Software provider Oracle (Charts) could be on the verge of another acquisition as the New York Times reports that it is near an agreement to buy Hyperion Solutions (Charts) for about $3 billion. Shares of Oracle fell about 2 percent in heavy Frankfurt trading.
In an after-hours filing Wednesday, financier Carl Icahn and his investments firms announced plans to acquire between $120 million and $500 million of Motorola (Charts) stock, sending shares of the cell phone maker up 3.4 percent in Frankfurt.
DVD rental retailer Blockbuster (Charts) is in advance talks to acquire Movielink LLC, an online movie-downloading company owned by the major Hollywood studios, according to a report in the Wall Street Journal.
The deal is likely to be worth less than $50 million, but could give a lift to the service, which is facing increased competition from firms like Apple's (Charts) iTunes and Blockbuster competitor Netflix (Charts) as well as general retailers such as Wal-Mart Stores (Charts).
Throughout the day major automakers are set to report their February sales. General Motors (Charts) and Ford Motor (Charts) have already warned that their sales totals are expected to be less than forecasts, and it's possible that the traditional Big Three automakers could end up with less than half of U.S. monthly auto sales for the first time ever.
In other auto news, German carmakers BMW and DaimlerChrysler (Charts) announced Thursday they have agreed to co-develop a fuel-efficent gas and electric hybrid transmission systems for rear-wheel-drive premium cars. DaimlerChrysler is already working the GM on shared hybrid technology in an effort to catch efforts in the area by Japanese automakers such as Toyota Motor (Charts) and Honda Motor (Charts).
No. 1 video game publisher Electronic Arts (Charts) is teaming with Apple's iTunes to make it easier for its customers to purchase music that is on its video games, according to a report in the Journal.
Oil gained slightly as U.S. light crude rose 17 cents to $61.96 a barrel in electronic trading.