U.S. Stock Futures Plunge on Weak Housing Starts

Elena
16 Aug, 2007
New York City

U.S. stock futures plunged on Thursday, following a heavy sell-off the previous session as well as economic data showing new home construction at a 10-year low. Housing starts fell 6.1% in July to a seasonally adjusted annual rate of 1.381 million, lower than the expected fall to 1.40 million. Countrywide''s decision to tap its entire credit line and a hint from a FedReserve official that there won''t be a rate cut soon further weighed on sentiment.

[R]09:00AM U.S. stock futures plunged, dragged by weak housing data and Countrywide Financial.[/R]

U.S. stock futures plunged on Thursday following a heavy sell-off the previous session as well as economic data showing new home construction at a 10-year low. Housing starts fell 6.1% in July to a seasonally adjusted annual rate of 1.381 million, lower than the expected fall to 1.40 million.

Countrywide's decision to tap its entire credit line and a hint from a Fed Reserve official that there won't be a rate cut soon further weighed on sentiment. The Fed said it would step in with a 14-day repurchase agreement worth $5 billion.

Countrywide Financial ((CFC)) said it would draw on an $11.5 billion credit facility to fund its operations as difficulty raising money in the credit markets threatened its business. The lender also accelerated its plans to transfer its mortgage production operations into Countrywide Bank. Company's shares dropped 11% in pre-open trading.

On the earnings news front, J.C. Penney ((JCP)) posted Q2 earnings above forecast and lifted its full-year profit outlook. Hewlett-Packard ((HPQ)) is scheduled to release financial results after the closing bell. Among other pre-market highlights, Amgen ((AMGN)) lost 1.5% on its plans to cut up to 14% of its workforce in order to reduce costs.

The dollar touched a 13-month low vs. the yen. S&P 500 futures fell 16.4 points at 1,397.90 and Nasdaq 100 futures dropping 17.75 points at 1,860.75. Dow industrial futures fell 121 points. Treasury yields fell to 4.667%.


[R]08:00AM J.C. Penney posted Q2 profit increase and lifted full-year forecast.[/R]

J.C. Penney Co. ((JCP)) posted nearly 2% earnings increase in Q2 to exceed analyst expectations and lifted its profit outlook for the full year. The department store retailer earned $175 million, or 78 cents a share, from continuing operations, compared with the year-ago continuing operations profit of $178 million, or 75 cents a share.

Quarterly sales rose 3.6% from a year ago to $4.39 billion. Analysts had expected a profit of 77 cents a share on sales of $4.42 billion. Looking ahead, J.C. Penney raised its full-year earnings forecast by a penny to $5.50 a share, above the average analyst estimates for $5.48. The stock slipped 3.3% in pre-market trading.