Futures fall on economic worry, GM shares fall

In Asia and Europe shares were on track for their biggest monthly declines ever as Japan’s interest rate cut failed to erase concerns about the deteriorating global economic outlook.

GM’s shares fell about 5 percent in premarket trading after three people with direct knowledge of talks told Reuters a deal to merge the U.S. automaker and Chrysler LLC hit an impasse after the Bush administration ruled out funding for it.

Technology shares could be under pressure after Intel Corp

said in a regulatory filing that the recent financial crisis could have a negative impact on its chipmaking business, results of operations and financial condition. Intel shares fell more than 2 percent before the bell.

Friday’s economic data provided further evidence of a deep slowdown. U.S. consumers cut their monthly spending for the first time in two years during September, evidently bracing for hard times as jobs continue to disappear and credit conditions tighten. Economic reports still on tap include consumer sentiment data and Chicago-area manufacturing data.

But Friday’s weakness follows a positive week for stocks, in which investors began to tiptoe back into the market to scour for bargains.

“There is a tug of war between those who see valuations that are attractive and those that focus on that we are going into a pretty bad recession. The data this morning helped set the tone,” said Craig Peckham, equity trading strategist at Jefferies & Company in New York

“This morning’s corporate news exemplifies the uncertainty that is out there. The question is what is the magnitude going to be and how long it will be before things start to rebound.”

S&P 500 futures fell 8.10 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures slipped 41 points, and Nasdaq 100 futures dropped 20 points.

With one trading session left in October, the Dow is down 15.39 percent for the month, putting it on track for worst month since October 1987.

Video game publisher Electronic Arts added to jitters about the corporate earnings picture after it slashed its full-year profit forecast due to slowing demand at retail stores, driving its stock down 14 percent after hours on Thursday.

Cummins Inc, a U.S. maker of engines and power generators, said quarterly earnings rose 24 percent as strong overseas growth overshadowed weakness in North America.

But Chevron Corp’s third-quarter profit more than doubled, the oil companies said, as high oil prices and healthy margins at its refineries boosted its bottom line.

Google Inc and Yahoo Inc will also be in the spotlight after The Wall Street Journal reported they could announce a decision to walk away from their search deal by the middle of next week. The Journal cited people familiar with the matter.

Federal Reserve Chairman Ben Bernanke is due to speak on mortgage finance before the Symposium on the Mortgage Meltdown, the Economy and Public Policy at the University of California at Berkeley.