U.S. stock futures dropped Friday as spreading recession fears power a global sell-off in all investments that carry risk.
Markets in Asia closed sharply lower. The broad STOXX 50 index of European shares was down 1 percent. U.S. markets have fallen for four straight sessions, driving the Standard & Poor’s 500 index down more than 7 percent this week.
Treasury yields remain near record lows as traders amass lower-risk bets. Demand for Treasurys drives their prices higher and their yields lower.
At 8:40 a.m. Eastern time, S&P 500 futures fell 14, or 1.3 percent, to 1,109. Dow Jones industrial average futures lost 120, or 1.1 percent, to 10,530. Nasdaq 100 futures slid 26, or 1.2 percent, to 2,149.
Finance ministers from 20 leading economies pledged late Thursday to take “all necessary actions to preserve the stability of the banking systems and financial markets” and make sure banks have the cash they need to stay afloat.
The announcement offered no new specifics, and did little to stem the selling. London’s FTSE 100 fell 1.2 percent, Germany’s Dax lost 2.1 and France’s CAC 40 dropped 1.8.
The Dow Jones industrial average has dropped 6.7 percent this week, its worst showing since the week ended Oct. 3, 2008. That’s the week Congress struggled to pass the $700 billion bank bailout known as the Troubled Asset Relief Program.
Fears about Europe’s debt crisis were stoked early Friday by news that Moody’s Investors Service had downgraded eight Greek banks by two notches. The rating agency said the banks hold too much Greek debt. It said Greece’s economic situation is worsening as government attempts to slash spending provoke violent protests.
The agency said the outlook for the banks’ long-term deposit and debt ratings was negative.
Greece appears increasingly likely to default on its debts. European officials have begun to speak openly of the possibility, and the fears have roiled international markets.
Greece will run out of money in the coming weeks if it fails to convince lenders it is meeting cost-cutting goals and deserves another round of bailout money.
A default by Greece would hurt banks in Greece, France and Germany that hold billions in Greek debt. Their holdings would lose value quickly, eroding the financial cushions banks keep to absorb unexpected losses.
A default would also increase investors’ concerns about defaults by other financially-troubled nations, such as Ireland, Portugal, Italy and Spain. If investors dumped bonds issued by those governments, their borrowing costs would spike. Investors fear a cascade of defaults akin to the global credit freeze after the 2008 bankruptcy of investment bank Lehman Brothers.
Europe’s economy is barely growing. A financial shock could tip Europe into recession, and would increase chances for a U.S. recession.
Companies that produce commodities lost value in premarket trading. Products such as silver, fossil fuels and industrial metals would lose value if economic growth slowed.
Silver lost 9.6 percent on Thursday. About half of demand for the metal comes from industrial users. Benchmark crude oil fell 6.3 percent, extending its 29-percent drop since April.
Traders sold precious metals to raise cash during Thursday’s plunge. Gold fell 3.7 percent on Thursday.
In premarket trading, Freeport-McMoRan Copper & Gold lost 4.8 percent. Cabot Oil & Gas Corp. fell 3.4, and Cliffs Natural Resources Inc. declined 3.2.
Traders dumped other investments that are more valuable in a growing economy, such as oil and raw materials. Benchmark crude fell 6.3 percent. It has dropped 29 percent since April as growth slowed.
The commodity sell-off continued on Friday. Crude oil fell 2.6 percent, gold 2.6 and silver 10.4.
Copyright 2011 The Associated Press.
