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‘Panic’ in U.S. Futures Rattles Investors Worldwide

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Eric Martin and Lynn Thomasson
Monday, Oct 27, 2008

U.S. stock-index futures are becoming less reliable as predictors of market moves.

With equity investors around the world contending with the worst drop since the Great Depression, futures on the Standard & Poor’s 500 Index misstated gains or losses by an average 1.4 percentage point in October, twice the gap in the third quarter, data compiled by Bloomberg show. One of the biggest misses was Oct. 24, when futures fell as much as 60 points, while the index itself dropped 37 points in the first half hour of trading, before closing down 31.

The pre-market readings may be adding to volatility during a month poised to be the worst in the 38-year history of MSCI Inc.’s index for developed countries, investors said. While fundamental concerns about the health of the global economy and solvency of banks are weighing on investors, the false cues are adding to uncertainty, said Arthur Cashin, director of floor operations for UBS Financial Services at the New York Stock Exchange.

“It’s a state of permanent anxiety, because you don’t know where things are going to go,” said Cashin, a member of the NYSE for 44 years. “People are scrambling to try to stay up with it, so far unsuccessfully.”

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The MSCI World lost more than a quarter of its value this month as subprime-related credit losses topped $680 billion and global economic growth slowed. The S&P 500’s 40 percent loss in 2008 would be the most since 1931. December futures on the U.S. benchmark fell 1.4 percent today before trading began on the NYSE, more than double the index’s 0.6 percent decline at 10 a.m. in New York.

This article was posted: Monday, October 27, 2008 at 11:10 am

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