Dow Futures Drop Ahead of Economic Data

LONDON -- Stock index futures at 7 a.m. EDT indicate that the Dow Jones Industrial Average (DJINDICES: ^DJI  ) may open down by 0.5% this morning, while the S&P 500 (SNPINDEX: ^GSPC  ) may open 0.53% lower.

European markets dropped this morning, and the FTSE 100 was down almost 1% at 7 a.m. EDT. The falls are likely to be caused by profit-taking ahead of today's U.S. economic reports as European markets come to the end of what will almost certainly be a 12th consecutive month of gains. There were also concerns that May's official China purchasing managers' index, due tomorrow, will show that Chinese manufacturing growth has stalled.

Analysts' consensus forecasts for today's U.S. economic reports indicate that personal income may have risen by 0.2% in April, repeating its 0.2% rise in March. Consumer spending is seen having fallen by 0.1% in April after gaining 0.2% in March. Both reports are due at 8:30 a.m. EDT and will be followed at 9:45 a.m. EDT by the Chicago purchasing managers' index, which is expected to have risen to 49.9 in May, up from 49 in April. Finally, at 9:55 a.m. EDT, May's consumer sentiment report is expected to show a nominal rise to 83.8 from 83.7 in April.

No major corporate earnings reports are due today, which means that the Dow and S&P 500 are likely to be influenced by economic data and month-end positioning by institutional investors. The Dow Jones is up 4.2% so far this month and 14.2% so far this year, while the S&P 500 has gained 4.5% in May and is up 13% so far this year, so investors may be keen to lock in gains ahead of potential volatility this summer.

Stocks that may be actively traded when markets open include Dell after several major shareholders announced they would sue the firm to block founder Michael Dell's buyout bid for the company, which they say is underpriced. Guess is up 10% in premarket trading after reporting adjusted first-quarter earnings of $0.14 per share last night, beating analysts' forecasts of $0.08 per share. Heading the other way, Palo Alto Networks is down 13% in premarket trading after missing analysts' forecasts for third-quarter sales and cutting its guidance for the fourth quarter to between $106 million and $110 million, below analysts' estimates of $113 million, according to Bloomberg.

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