US futures reverse course, fall on European crisis

AP News

11/7/2012 8:51:55 AM - AP News

NEW YORK (AP) — U.S. stock futures reversed course and declined sharply Wednesday after dire warnings from Europe of a broad recession there is now all but certain.

Dow Jones industrial futures slid 120 points to 13,081. The broader S&P futures have given up 12.4 points to 1,412.80. Nasdaq futures tumbled 26.5 points to 2,649.20.

All major indexes had been pointing higher before the European Union further lowered its expectations for the 27-nation economic bloc. It said European nations will see further declines, and the road back to recovery will take longer because of the viciousness of the continent's debt crisis.

The EU confirmed earlier predictions that the 17 nations that use the euro will tumble into recession soon.

The EU cut its economic forecast, saying that it now expects the region's gross domestic product to contract by 0.3 percent on an annual basis this year, rather than remaining flat as it predicted in the spring. It also said that the 17 countries that use the euro will contract, with GDP falling 0.4 percent.

Earlier forecasts put a GDP contraction at only 0.3 percent.

Even Germany, Europe's economic powerhouse, may be listing. The nation's panel of independent economic advisers said the economy is weakening faster than expected and urged policy makers to make deeper cuts in spending.

The panel in its annual report said that plans by Chancellor Angela Merkel's coalition government to increase social welfare spending "go in the wrong direction."

European markets also gave up early gains after getting a boost from the re-election of President Barack Obama.

The FTSE 100 index of leading British shares fell 0.2 percent at 5,872 while Germany's DAX fell 0.4 percent to 7,358. The CAC-40 in France slipped 0.4 percent lower to 3,465.

U.S. corporations continued to put up strong numbers for the quarter.

Profit for Kraft Foods jumped 13 percent in the third quarter, the food maker said Wednesday, as new products and a marketing blitz pushed it beyond most Wall Street expectations.

Time Warner Inc. beat expectations as well, with its cable television division picking up some of the drop-off from the Warner Bros. movie business, which didn't see the same numbers it did last year when the final Harry Potter movie was packing theaters.