U.S. Stock Futures Weighed Down by IBM and European Markets

By Saumya Vaishampayan 

U.S. stock futures fell Wednesday, weighed down by a disappointing outlook from International Business Machines Corp. and declines in European stocks.

Dow Jones Industrial Average futures declined 90 points, or 0.5%, to 17371. S&P 500 futures slipped eight points, or 0.4%, to 2009 and Nasdaq-100 futures lost 15 points, or 0.4%, to 4152. Changes in stock futures don't always accurately predict moves in the stock market after the opening bell.

IBM reported further declines in quarterly profit and revenue, and issued a profit forecast that fell below Wall Street's expectations. Shares fell 2.8% premarket, leading the Dow industrials lower.

European stocks fell, with the Stoxx Europe 600 down 0.3%.

Going into the fourth-quarter earnings season, analysts surveyed by FactSet had expected earnings growth of 1.1%, the weakest since the third quarter of 2012. U.S. companies faced dollar strength, a sharp downdraft in oil prices and weak economic growth abroad during the quarter. Early indications aren't looking too rosy; factoring in 51 companies that have already reported, the S&P 500 is on track to post earnings growth of just 0.36% from a year ago.

"Oil is probably the biggest story," said Bill Stone, chief investment strategist at PNC Wealth Management. "I know that energy earnings are going to be bad. The other side is, do any of the good [effects] of lower oil start showing up?" Mr. Stone noted that Delta Air Lines Inc.'s better-than-expected fourth-quarter results were helped in part by savings on jet fuel.

Stocks ended higher Tuesday, with the Dow industrials adding less than 0.1% to 17515.23. The S&P 500 rose 0.2% to 2022.55.

Investors are turning their attention to Thursday's European Central Bank meeting, at which many expect the central bank to announce large-scale purchases of government bonds. Ewald Nowotny, a member of the ECB's governing council, said Wednesday policy makers and central bankers should not get overexcited about Thursday's meeting and should retain a longer-term perspective.

U.S. housing starts rose 4.4% in December to a seasonally adjusted annual rate of 1.089 million, the Commerce Department said Wednesday. The results far overshot the expected rise of 1% seen by economists surveyed by The Wall Street Journal.

In commodity markets, crude-oil futures added 0.4% to $46.65 a barrel. Gold futures tacked on 0.6% to $1302.50 an ounce.

The yield on the 10-year Treasury note fell to 1.792% from 1.806% on Tuesday. Yields fall as prices rise.

Write to Saumya Vaishampayan at [e-mail]

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