Stock futures fall as retail sales drop By LAUREN VILLAGRAN, AP Business Writer

Stock futures fall as retail sales drop By LAUREN VILLAGRAN, AP Business Writer
32 minutes ago



NEW YORK - U.S. stock futures extended their declines Friday after the government reported August retail sales excluding autos fell sharply, suggesting that consumers held off spending in the face of turmoil in the financial markets.

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Weaker retail sales were expected after the chain stores reported disappointing results earlier this month. Still, the report was worse than economists predicted. The Commerce Department said retail sales fell 0.4 percent in August excluding vehicle sales, compared with a 0.7 percent rise in July and economists' consensus forecast for a 0.1 percent increase.

Investors have been on edge over whether tight credit, a housing slump and volatility on Wall Street have hurt the consumer, whose willingness to spend is critical to economic growth. The feeble retail sales figure makes it more likely that the Federal Reserve will cut its benchmark federal funds rate on Tuesday. But while investors have been clamoring for such a cut to stimulate business activity, Friday's report raised concerns about a slowdown in economic growth.

Dow Jones industrial futures, already down before the retail sales report, slid 86, or 0.64 percent, at 13,450. Standard & Poor's 500 index futures lost 10.50, or 0.70 percent, to 1,487.50, and Nasdaq 100 index futures shed 17.25, or 0.85 percent, to 2,007.25.

Merrill Lynch downgraded shares of chip maker Intel Corp. and credit card company American Express Corp., Dow Jones Newswires reported, sending both stocks lower in premarket activity.

A separate report Friday showed that consumer confidence, as measured by the RBC Cash Index, fell to 71.1 in early September, a sharp drop from an August's level of 89.3. It was the worst showing since May 2006.

Investors are also awaiting a report on August industrial production and a preliminary reading on September consumer sentiment. Economists polled by IFRMarkets.com expect the University of Michigan's preliminary reading on September consumer sentiment to have weakened slightly. Industrial production is forecast to have risen 0.3 percent in August, on pace with July.

Also pressuring stock futures was news that the Bank of England approved emergency funding for lender Northern Rock PLC to head off a possible liquidity crisis. Northern Rock issued a profit warning and blamed the shortfall on credit market turmoil.

Investors in London reacted badly to that news, which heightened concerns about the viral nature of problems in the U.S. subprime mortgage market. Adding to the disappointment, a key house price index in Britain showed a 2.6 percent decline in September. The index is considered an indicator of future prices. Britain's FTSE 100 fell 2.00 percent.

Other European stock markets also slumped. Germany's DAX index fell 1.01 percent, while France's CAC-40 fell 1.20 percent.

Bond prices rose, as the 10-year Treasury note yield fell to 4.45 percent from 4.48 percent.

The Dow rose more than 130 points on Thursday, helped by strong gains in shares of McDonald's Corp., which raised its dividend, and General Motors Corp. on reports of progress with labor negotiations.

As talks with the United Auto Workers continued overnight, the union was expected to choose GM as the lead company in contract negotiations with the Detroit Three. Contracts between the UAW and GM expire Friday at midnight.

In Asia, Japan's Nikkei stock average rose 1.94 percent at the close, while Hong Kong's Hang Seng Index gained 1.47 percent.

Oil fell below the $80 a barrel mark in electronic trading before the opening of the New York Mercantile Exchange. Gold prices also weakened, as the U.S. dollar traded mixed against other major currencies.