Dow Heads Lower as $85 Billion Spending Cuts Take Effect


LONDON -- Stock index futures at 7 a.m. EST indicate that the Dow Jones Industrial Average may open down by 0.36% this morning, while the S&P 500 may open 0.45% lower.

Today is the day when sequester -- $85 billion of automatic, across-the-board spending cuts -- is due to come into effect, but there will be little immediate impact, and investors' attention is likely to be focused on the economy, with a raft of new data due today. First up, at 8:30 a.m. EST, are January's personal-income and consumer-spending figures. Consensus forecasts suggest that personal income may have fallen by 2.6% in January after rising 2.6% in December. Consumer spending is expected to have increased by 0.2% in January after rising 0.2% in December.

At 9:55 a.m. EST, the University of Michigan Consumer Sentiment Index for February is due. Analysts are expecting it to be broadly unchanged at 76.4, up slightly from 76.3 in January. At 10 a.m. EST, the February ISM manufacturing PMI is expected to slip slightly to 52.5, down from 53.1 in January. In another report due at 10 a.m. EST, construction spending is expected to have grown by 0.7% in January after rising by 0.9% during December. Finally, February's motor vehicle sales are expected to be broadly in line with the previous month at 15.2 million, compared with 15.3 million in January.

A number of big companies are due to update the markets today, including Best Buy, which is expected to report earnings of $1.54 per share. Reports in the Wall Street Journal and Bloomberg this morning suggest that talks between Best Buy and the company's founder, Richard Schulze, have ended, eliminating any hope that Schulze would be able to secure a more active role in running the company or take it private. Other companies due to report before markets open include Pepco Holdings and Exelis.

Groupon stock could be actively traded today after the company announced last night that it had fired its CEO and founder, Andrew Mason. Groupon stock was up 4.2% in premarket trading this morning. may also be in demand; the company's stock was up 4.8% in premarket trading after it reported a 32% rise in Q4 revenue and earnings per share of $0.51 last night, beating estimates of $0.40 per share.

European markets
In Europe, markets moved lower this morning as commodity prices weakened on news that the official Chinese manufacturing PMI fell to 50.1 in February, down from 50.4 in January. New EU figures showed that the eurozone unemployment rate hit a new record of 11.9% in January, while U.K. manufacturing has also begun to contract: The U.K. manufacturing PMI fell to 47.9 in February from 50.5 in January.

At 7:40 a.m. EST, the DAX was down 0.93%, the CAC 40 was down 1.4%, the FTSE MIB was down 2.06%, and the IBEX 35 was down 1.16%. In London, the FTSE 100 was down by 0.62%, with Lloyds Banking Group the biggest faller, down 7.1%% after it released its final results revealing a pre-tax loss of 1.3 billion pounds.

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