Futures Slide on Meager Growth Figures
NEW YORK (AP) — Stock futures slid Wednesday after the government revealed that economic growth in the U.S. shrank in the final quarter of 2012, the first time that has happened in more than three years.
Dow Jones industrial futures fell 12 points to 13,896. The broader S&P futures gave up 2.6 points to 1,502.50. Nasdaq futures slipped 3 points to 2,739.75.
Part of the reason for the slowing growth was the biggest cutback in U.S. defense spending in four decades.
The economy contracted at an annual rate of 0.1 percent in the fourth quarter, according to the Commerce Department. That's a sharp slowdown from the 3.1 percent growth rate in the July-September quarter, and it was worse than most economists had expected.
It immediately raised questions about the strength of the economic recovery going forward, given the tax increases that went into effect this month, and also additional government spending cuts that are on the way.
There were encouraging signs in the Commerce Department report.
There was a growth in business and consumer spending, the latter making up about 70 percent of overall economic growth.
Attention now turns to the Federal Reserve, which wraps up a two-day policy meeting Wednesday and could provide hints about interest rates going forward. While government spending cuts and a slower inventory buildup shaved a total of 2.6 percentage points from growth, both of those numbers tend to be volatile.
And a private survey Wednesday also showed that U.S. businesses increased hiring in January compared with a revised December reading.
Employers added 192,000 jobs in January, according to payroll processor ADP. That's more than December's revised number of 185,000, which had initially been reported at 215,000.
The ADP report is derived from payroll data and tracks total nonfarm private employment each month. The increase in hiring occurred after Congress and the Obama administration reached an agreement on Jan. 1 to avoid sharp tax increases and across-the-board government spending cuts.
Also on Wednesday, Boeing topped most Wall Street expectations for the fourth quarter. More importantly perhaps, the plane maker said that earnings this year will be $5 to $5.20 per share, with revenue of $82 billion to $85 billion. The outlook assumes "no significant financial impact" from the grounding of the 787, the company's most advanced aircraft that has suffered a series of mishaps.
U.S. investigators said Wednesday that they have asked Boeing Co. to provide a full operating history of lithium-ion batteries used in its grounded 787 Dreamliners after Japan's All Nippon Airways revealed it had repeatedly replaced the batteries even before overheating problems surfaced.