Stocks headed for a lower open on Friday after data showed the U.S. economy contracted for the fourth straight quarter and consumer spending dropped sharply, fanned fears that a recovery would be weak.
Even though the contraction was at a slower-than-expected pace, second-quarter gross domestic product report, which measures total goods and services produced within the U.S. borders, revealed that consumers remained under strain.
According to the report, consumer spending dipped at 1.2 percent rate after rising 0.6 percent in the previous quarter. Consumer spending is a key driver of corporate profitability, accounting for about two-thirds of U.S. economic activity.
I think the market's selling off because of the consumer element. That's 70 percent of GDP and that was a little softer than we thought, said Burt White, chief investment officer at LPL Financial in Boston.
The silver lining is we're continuing to see inventories get drawn down. You can only do that for so long because that just means that companies are finding their shelves are more and more bare, and I think that bodes well for the second half.
S&P 500 futures were 2.20 points lower and below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures shed 16 points, and Nasdaq 100 futures lost 3.75 points.
Investors have pushed stocks to 9-month highs over the past month, emboldened by stronger-than-expected second-quarter corporate profits and hopes of economic stabilization.
Stocks to watch include Chevron Corp
(Reporting by Ellis Mnyandu; additional reporting by Leah Schnurr; editing by Jeffrey Benkoe)