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Stock Futures Fall as Spending Cuts Loom


NEW YORK ( TheStreet) -- Stock futures kicked off March on a somber note Friday as a barrage of discouraging global economic data and the looming U.S. sequestration deadline involving $85 billion of automatic spending cuts weighed on the markets.

The U.S. Senate Thursday failed to find a way to avert the cuts in last-ditch attempts. Two bills, one from Republicans and the other sponsored by Democrats, didn't garner sufficient support.

President Barack Obama is scheduled to meet with lawmakers at 10 a.m. EST for more discussions about avoiding the spending cuts, but it's looking highly likely the cuts will kick in Friday night.

UBS economists expect that delayed compromise will be reached in the coming weeks, which Gareth Berry, a currency strategist at UBS, said should limit the economic fallout. "Nevertheless, they have already incorporated a 0.3% fiscal drag into their U.S. growth forecast for this year, a forecast which remains at 2.3%," said Berry.

Futures for the Dow Jones Industrial Average were off 60 points, or 59.49 points below fair value, at 13,978. Futures for the S&P 500 were down 8.75 points, or 8.73 points below fair value, at 1504. Futures for the Nasdaq were down 13.25 points, or 13.23 points below fair value, at 2724.

Major U.S. stock averages dived in the final hour of trading on Thursday, reversing day-long gains, as a lower-than-expected revision in fourth-quarter gross domestic product data offset better-than-anticipated Chicago business activity and jobless claims reports.

A raft of economic data was being released Friday.

The Bureau of Economic Analysis reported that personal income levels in January fell 3.6% after rising 2.6% the previous month. Economists expected personal income levels in January to fall 2.4%.

Personal spending levels increased 0.2%, after a downwardly revised 0.1% rise the prior month. Expectations were for an uptick of 0.2%.

Looking at inflation, the headline PCE price index ticked up 0.1% after being flat in December. It was forecast to have ticked up 0.2%.

"Bear in mind the drop in incomes are largely about the payroll tax restoration, higher taxes and importantly the accelerated bonus/dividend payments in December, so this drop is a one-off ... even if a big one," said David Ader, strategist at CRT.

The final read on the University of Michigan consumer sentiment index, out at 9:55 a.m., is expected to stay at a level of 76.3 for February.

The Institute for Supply Management's manufacturing survey at 10 a.m. is estimated to have slipped to 52.4 in February from 53.1 in January.

Construction spending for January also is released at 10 a.m.

In addition, February auto and truck sales figures are due throughout the day.

The Nikkei Average in Japan closed up 0.41% and the Hong Kong Hang Seng index settled down 0.61% Friday as China's official manufacturing PMI disappointed, falling for a second straight month. Analysts think part of the decline was attributable to the long public holidays.