Economic Stats, JPM Drag on Futures

Futures fell sharply Wednesday after a trio of dismal economic news and a profit warning from JPMorgan Chase.

Futures were down for most of the morning but sharply pared losses just before JPMorgan issued its results. Once the numbers arrived, Dow, S&P and Nasdaq futures all retreated to earlier levels. Futures fell even further after the 8:30 numbers.

Producer prices dropped 0.4 percent, as expected, in September but core PPI, which excludes volatile food and energy costs, shot up 0.4 percent, double the forecast. Retail sales tumbled 1.2 percent last month, well above the 0.7-percent drop economists had expected. Excluding autos, retail sales fell 0.6 percent, double of what was expected. The NY Fed reported it Empire State gauge of regional manufacturing activity tumbled to minus-24.62, more than double the forecast and the lowest reading since the index was created in 2001.

Today’s retail-sales numbers were an early warning sign of how bad it’s become for consumers – and it’s only going to get worse, said Art Cashin, director of floor operations at UBS.

“The impact on the economy will only really begin to dawn on people in several weeks and maybe a month or so,” Cashin told CNBC. “I think the consumer has actually finally hit the wall and we’re going to see it as we get near Christmas.”

Economists now expect we'll see a contraction in GDP in the third quarter, sooner than expected, as consumer spending accounts for two-thirds of economic activity.

These "early reports spell clear recession in the third quarter as GDP is set for a big drop," Robert Brusca, of Fact and Opinion Economics, wrote in a note to clients following the reports.

JPMorgan reported third-quarter earnings per share of 11 cents, including losses related to the merger with Washington Mutual, beating revised market expectations. Over the last 30 tumultuous days, the consensus forecast for JPMorgan's earnings per share has sunk from a gain of 37 cents to a loss of 21 cents.

But revenue missed expectations coming in at $14.74 billion against the $16 billion consensus forecast.

The Dow futures did get some help from Coca-Cola , though, which topped market expectations with a profit of $0.83 cents a share, excluding items.

Looking to the economy, Janet Yellen, President of the San Francisco Fed, said the U.S. economy appeared to be in a recession and would likely contract in the fourth quarter after near-flat growth in the third.

"The outlook for the U.S. economy has weakened noticeably," Yellen said in a speech to the Financial Executives International's Silicon Valley chapter in Palo Alto, California. "Virtually every major sector of the economy has been hit by the financial shock."

European Union leaders meet in Brussels, just days after pledging 2.2 trillion euros ($3.02 trillion) to rescue European banks and jolt frozen money markets into life, aiming to press for an overhaul of the world's financial structures after Asia joined western bastions of capitalism in bailing out banks.

Asian markets fell towards the end of the session and although the Nikkei finished in the green, the other markets were down. European stock markets were deep in the red as fears that the bailouts were not enough to avert the crisis resurfaced.

Still to Come:

WEDNESDAY: Weekly mortgage applications; Empire State manufacturing survey; PPI; retail sales; business inventories; weekly crude inventories; Fed's beige book; Earnings from Abbott Labs, Coca-Cola, JPMorgan, Wells Fargo and eBay
THURSDAY: CPI; weekly jobless claims; industrial production; Philly Fed survey; weekly natural-gas inventories; Earnings from Bank of New York Mellon, BB&T, Citigroup, CIT Group, Continental, Harley-Davidson, Hershey, Merrill Lynch, Nokia, PNC Bank, Southwest Air, United Technologies, AMD, Capital One, Google and IBM
FRIDAY: Housing starts; consumer sentiment; Earnings from Gannett, Honeywell and Sony Ericsson

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