Futures Turn Lower on Wal-Mart Outlook

Updated from 7:08 a.m. EST

By Madlen Read

NEW YORK -- Wall Street headed for a sharply lower open Thursday as investors absorbed bad news from Wal-Mart (WMT Quote), which signaled that even the stronger U.S. retailers are struggling.

The nation's largest retailer said sales in December at stores open for at least a year rose by 1.7% after stripping out fuel, worse than analysts' estimates. Wal-Mart also slashed its forecast for fourth-quarter earnings, and its shares fell in premarket trading.

Consumers have been cutting back spending as the job market deteriorates. According to the median estimate of economists surveyed by Thomson Reuters/IFR, the Labor Department is expected to report Thursday that the number of new claims for jobless benefits jumped last week to 540,000 from 492,000 in the previous week.

As readings on the job market and consumer spending worsen, most on Wall Street are hoping that a stimulus package proposed by President-elect Barack Obama will get congressional approval. Obama said Thursday the nation's recession could "linger for years" unless Congress acts, according to the text of a speech to be delivered at George Mason University in Fairfax, Va.

Ahead of the market's open, Dow Jones Industrial Average futures fell 114, or 1.3%, to 8,630. S&P 500 index futures fell 11.20, or 1.2%, to 894.00, but Nasdaq 100 index futures fell 6, or 0.5%, to 1,233.50.

In tech sector news, computer maker Dell (DELL Quote) said it would slash 1,900 jobs in Ireland, while Lenovo, another computer maker, warned it expects a loss for its latest quarter and will lay off 2,500, or 11%, of its work force worldwide.

On Wednesday, the Dow fell 245 points on worries about unemployment and a warning from technology giant Intel Corp. about poor business conditions.

Government bond prices rose modestly in premarket trading Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 2.47% from 2.50% late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, was flat at 0.11%.

The dollar was mixed against other major currencies, while gold prices fell.

Britain's FTSE 100 was down 1.9% in afternoon trading, as the Bank of England cut its official interest rate by half a percentage point to 1.5% -- the lowest level in its 315-year history. The Federal Reserve last month slashed rates to a record-low range of zero to 0.25%.

In other European trading, Germany's DAX index fell 1.7%, and France's CAC-40 fell 2.1%. In Asian trading, Japan's Nikkei stock average fell 3.9%, and Hong Kong's Hang Seng index fell 3.8%.

Crude oil prices fell 2 cents to $42.61 a barrel in premarket electronic trading on the New York Mercantile Exchange.