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Futures drop on Intel, recession fears

NEW YORK - U.S. stock index futures were down sharply on Wednesday, suggesting stocks may add to Tuesday’s deep losses, after Intel Corp’s quarterly results and outlook were below Wall Street targets, heightening fears of recession.

In Asia, Hong Kong stocks tumbled more than 5 percent and Japan’s Nikkei index closed more than 3 percent lower.

The Russell 2000 index is down 18.5 percent from its record close in July, indicating small-cap stocks are on the cusp of an official bear market.

Analysts said they were disappointed with Intel’s revenue outlook. Shares of the world’s largest chip maker and Dow component sank 15 percent in after-hours trading on Tuesday. If shares fall as much in the regular session, it would be Intel’s worst decline since October 2002.

“Everybody’s looking for the second half of the year and for the economy to recover, but the outlooks are not supporting that view right now,” said Peter Dunay, investment strategist at Leeb Capital Management in New York. “If we continue to see outlooks that are not that positive, then it’s got the market under pressure.

S&P 500 futures were down 11.90 points, below fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures dropped 116 points, and Nasdaq 100 NDc1 futures lost 28 points.

Shares of financial services companies will be in focus after JPMorgan Chase & Co reported lower earnings and said it ”remains extremely cautious” entering 2008.

Shares of California Pizza Kitchen joined other restaurant chains in cutting their profit forecasts. The company reported results late on Tuesday that missed analysts’ estimates and slashed its outlook by about 35 percent, sending its shares down 20 percent in after-hours trading.

Other companies set to report earnings include American Airlines operator AMR Corp and auto insurer Progressive Corp.

Stocks plunged 2 percent on Tuesday on recession fears fueled by an unexpected drop in retail sales in December and a record loss by Citicorp.