Stock Futures Tumble on 'Fiscal Cliff' Setback

U.S. stock index futures pointed to a sharply lower open on Friday, brushing off better than expected economic data and instead focusing on the collapse of the Republicans' "Plan B" vote in the House of Representatives, aimed at offering a solution to the U.S. "fiscal cliff".

At 8:30 a.m., Dow futures were down 187 points, while S&P 500 futures were down 22 points. Both implied a greater than 1 percent decline at the open. The NYSE will observe a moment of silence to honor the Newtown, Conn. shooting victims at 9:30 a.m.

With time running short to find a solution before Christmas, the White House said it would work with Congress to avoid the series of tax increases and spending cuts set to kick in at the start of next year. President Barack Obama said he was hopeful a deal can be reached quickly.

House Speaker John Boehner has scheduled a 10 a.m. news conference to talk about the next step

Reading the 'Fiscal Cliff' Tea Leaves
Reading the 'Fiscal Cliff' Tea Leaves

"The odds of the U.S. slipping over the fiscal cliff have clearly risen. In a moment of bad political misjudgement, John Boehner tried to take a deal through Congress that clearly failed to have the President's support, only for it to be rejected by hawks in his own party," Rebecca O'Keeffe, head of investment at Interactive Investor said in a morning note.

"The market still expects agreement to be reached, but as we head towards the final week of the year, many investors will be reluctant to hang up their stockings and take a break as the issue goes down to the wire."

Barry Knapp, head of U.S. equity portfolio strategy at Barclays, said he thought the market was vulnerable to selling pressure even in a best case scenario. "Between now and when we finally get something done, we should be at 1,325 or 1,300 on the S&P," he told CNBC.

Turning to economic news, November personal income rose 0.6 percent while spending increased 0.4 percent. Economists polled by Thomson Reuters forecast income rose by 0.3 percent and spending rose by 0.4 percent.

Durable orders data for November, meanwhile, rose 0.7 percent. Economists polled by Reuters forecast growth in orders will remain at 0.5 percent. Orders rose 1.1 percent in October.

The University of Michigan Consumer Sentiment survey for December is due out at 9.55 a.m. Analysts polled by expect the index to remain at 74.5.

In earnings news, Research In Motion posted a third-quarter net loss of $114 million, or 22 cents per share, excluding items, sharply lower than the $1.27 a share in earnings it reported a year ago. Revenue plunged 48 percent to $2.7 billion from $5.22 billion in the year-earlier period. Results were ahead of analyst expectations, but the stock is under pressure after reporting a drop in subscriber rolls for the first time in its history.

It also worried investors during a conference call in saying it plans to alter its service revenue model. CEO Thorsten Heins told CNBC that worries about falling service revenue during the transition to BlackBerry 10 are unfounded.

Nike earned $1.14 per share for its second quarter, 14 cents above estimates, with revenue in line with estimates. Gross marginfell for the eighth straight quarter, but that streak could end soon based on the athletic footwear and apparel maker's current financial projections.

Drugstore chain Walgreen reported a fiscal first-quarter profit of $0.58 per share, excluding certain items, well below estimates of $0.70. Revenue also was slightly short of estimates. Walgreen said non-operational factors weighed on results, but the underlying business remains strong.