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Futures Skid Sharply on Global Economic Fears

Futures plunged sharply Thursday after the Federal Reserve warned of significant risks to the struggling economy and following a report that showed further contraction in China's manufacturing sector.

The NYSE invoked Rule 48 ahead of the open. The rule is implemented to speed up and smooth trading at the market open when high volatility is expected.

The Fed announced it would launch a new $400 billion program in a move to rebalance its $2.87 trillion portfolio—a version of the widely expected Operation Twist—by selling shorter-term notes and using those funds to purchase longer-dated Treasurys.

Despite the latest attempt to kickstart growth that slowed to a crawl over the first half of the year, the global markets were unimpressed.

Adding to concerns of another global recession, China's manufacturing sector contracted for a third straight monthin September. The world's second-largest economy is especially vulnerable to fading demand from the U.S. and Europe, its biggest export markets.

In addition, business activity in France and Germany grew at its weakest pace in more than two years in September and new orders fell for a third month, underscoring a loss of momentum in Europe's largest economies.

Oil prices plungedwith U.S. light, sweet crude falling naer $82 a barrel and London Brent crude sliding below $107. Gold prices tumbled almost $50 to trade near $1,765 an ounce, while copper hit a one-year low.

European shares plunged across the boardwith the FTSE, DAX and CAC all down more than 4 percent.

On the economic front, new claims for jobless benefits fell 9,000to 423,000 last week, according to the Laboar Department. Economists had expected claims to fall to 420,000 last week, according to Reuters.

FedEx slipped after the economic bellwether said it is trimming its earnings expectations for the fiscal year due to slowing global economic growth.

Meanwhile, Discover Financial Services posted a better-than-expected profit as customers spent more on their credit cards and delinquencies declined. However, the credit-card provider's shares still fell along with the broader market.

On the M&A front, United Technologies is acquiring aircraft components maker Goodrich in a $16.5 billion cash dealin what would be its largest deal since 2000.

Meanwhile in an abrupt shift in strategy, the United Auto Workers union has focused its contract negotiations on Ford MotorCompany after talks stalled with Chrysler.

And Exxon Mobil might receive much less compensation than the U.S. oil giant wanted from Venezuela for the nationalization of its assets in 2007 after the energy minister proposed a figure of $1 billion, according to Reuters.

The Federal Housing Finance Agency house price index for July will also be published at 10 am ET. The previous month’s index showed house prices increasing by 0.9 percent.

Late on Wednesday Greece adopted yet more austerity measures to secure a bailout instalment crucial to avoid running out of money next month, as the IMF warned that Europe's sovereign debt crisis risks tearing a giant hole in banks' capital.

The IMF also said the crisis had increased European banks' exposure by 300 billion euros, and they need to recapitalize to ensure they can weather potential losses.

—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC

On Tap This Week:

THURSDAY: FHFA home price index, leading indicators; Earnings from Nike
FRIDAY: IMF/World Bank annual mtg; Earnings from KBHome

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