U.S. futures tumble in wake of Fed warning; Dow plunges 2.6%

Investing.com – U.S. stock futures pointed to a sharply lower open on Thursday, tracking global equities lower as mounting fears over the global economic outlook sparked a broad-based selloff in risky assets.
 
Ahead of the open, the Dow Jones Industrial Average futures pointed to a loss of 2.6%, S&P 500 futures signaled a drop of 2.9%, while the Nasdaq 100 futures indicated a 2.5% decline.      

Concerns over the U.S. economic outlook intensified after the Federal Reserve warned of “significant downside risks” facing the U.S. economy on Wednesday and announced fresh measures to boost growth.

The Fed unveiled a plan to trade short-term bonds for long-term ones, in an attempt to boost the economy by pushing down long-term interest rates, a move dubbed “Operation Twist.”

Adding to global worries, a preliminary reading of the HSBC China purchasing managers' index fell to a two-month low of 49.4 in September, remaining in contraction territory for the third consecutive month.

Shares in the financial sector were hard-hit, with Bank of America shares falling 3.3%, Citigroup tumbling 4.2%, while investment banks Morgan Stanley and Goldman Sachs saw shares drop 4.1% and 2.9% respectively.

Raw material producers also contributed to losses, as commodity prices fell sharply amid the downbeat global outlook. Metal producer Freeport McMoran saw shares tumble 5.3%, oil giant Exxon-Mobil fell 3%, while U.S.-listed shares of BHP Billiton tumbled 5.2%. 

In earnings news, economic bellwether FedEx declined 1.5% after cutting its full-year earnings outlook, citing high fuel prices and moderate growth in the global economy. The company reported a 22% increase in fiscal first quarter earnings. 

On the upside, shares in information technology firm Red Hat jumped 6% after reporting a 21% increase in second quarter revenue, above market expectations for a 18.9% gain.

In deal news, aerospace supplier Goodrich rallied 10.3% after it agreed to be acquired by United Technologies in a deal valued at nearly USD18.4 billion. United shares were down 4.5% ahead of the open.

Across the Atlantic, European stock markets extended sharp losses after data showed that German manufacturing output fell to a 24-month low in September, while manufacturing activity in the euro zone slumped to the lowest since August 2009.

The EURO STOXX 50 plunged 5%, France’s CAC 40 sank 5.2%, Germany's DAX dropped 4.7%, while Britain's FTSE 100 fell 4.75%.

During the Asian trading session, Hong Kong’s Hang Seng Index plummeted 4.85%, while Japan’s Nikkei 225 Index dropped 2.1%.  

Earlier in the day, official data showed that first time jobless claims fell by 9,000 to 423,000 last week, falling short of expectations for a decline to 420,000.