U.S. stocks drop as data, budget talks in focus; Dow Jones down 0.67%

Investing.com - U.S. stocks opened lower on Friday, as investors eyed the release of U.S. economic reports, while concerns over upcoming U.S. budget talks, as well as over the situation in the euro zone weighed on investor confidence.

During early U.S. trade, the Dow Jones Industrial Average dropped 0.67%, the S&P 500 index retreated 0.71%, while the Nasdaq Composite index slid 0.79%.

Investors remained cautious as the "sequester" of USD85 billion of automatic spending cuts was set to hit at midnight on Friday.

U.S. President Barack Obama was to meet with Congressional leaders at the White House during the day to discuss ways to avoid sequestration striking, but hopes were low for a deal as Democrats and Republicans have so far failed to reach a compromise.

Meanwhile, disappointing data from the euro zone sparked fresh concerns over the outlook for growth in the bloc. A report earlier showed that the unemployment rate in the euro zone rose to a new record high of 11.9% in January from 11.8% the previous month.

Among earnings, Gap rose 0.76% after the clothes retailer said that fourth-quarter profit beat estimates, thanks to higher comparable store sales in North America.

Adding to gains, consumer electronics group Best Buy surged 5.67% after posting quarterly results that topped expectations.

Earlier in the day, the Wall Street Journal reported that the company ended talks with founder Richard Schulze over a deal in which he and a group of buyout firms were proposing to take a minority stake in the firm in exchange for three seats on the board.

Elsewhere, Groupon rallied 2.19% after the company fired on Thursday Andrew Mason as CEO for failing to put an end to the gradual erosion of the company's main daily deals business.

Financial stocks trended broadly lower on the other hand, as shares in JP Morgan tumbled 0.96% and Goldman Sachs plummeted 1.47%, while Bank of America and Citigroup plunged 1.69% and 2.14% respectively.

Bank of America said in a securities filing on Thursday that the New York State Attorney General was investigating the bank over its purchase, securitization and underwriting of home loans.

Also on the downside, Boeing slipped 0.13% amid reports it is preparing to cut hundreds of jobs at a South Carolina plant that makes 787 Dreamliners over the course of this year.

Across the Atlantic, European stock markets were sharply lower. The EURO STOXX 50 plummeted 1.58%, France’s CAC 40 tumbled 1.54%, Germany's DAX retreated 1.33%, while Britain's FTSE 100 dropped 0.55%.

During the Asian trading session, Hong Kong's Hang Seng Index dropped 0.61%, while Japan’s Nikkei 225 Index advanced 0.41%.

Also Friday, official data showed that U.S. personal spending rose 0.2% in January, in line with expectations, after a 0.1% rise the previous month.

Later in the day, the U.S. was to release a report from the Institute of Supply Management on manufacturing activity and revised data on consumer sentiment from the University of Michigan.