U.S. stock futures drop on Europe bank woes

NEW YORK (MarketWatch) — U.S. stock futures reduced their losses Thursday after the ADP private payroll survey found a 325,000 increase in jobs in December and jobless claims remained under 400,000 last week.

The U.S. economic data helped counter bearish sentiment that came on worries that Europe’s troubles may worsen.

“The labor market is improving. With respect to the S&P futures only bouncing modestly in light of the blowout ADP figure, Europe continues to trade weak and U.S. retail comps had many misses in December,” noted Miller Tabak equity strategist Peter Boockvar in emailed commentary.

Futures for the Dow Jones Industrial Average DJ2H +0.24%   were off 12 points at 12,344.

Futures for the S&P 500 SP2H +0.38%  declined 2.6 points to 1,270.40.

Those for the Nasdaq 100 ND2H +0.17%  shed 1 point to 2,327.75.

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European shares were lower, with banks leading the way.

Italy’s UniCredit SpA IT:UCG -11.12%  Wednesday offered new shares at a steep 43% discount to current prices as part of a plan to raise 7.5 billion euros ($9.7 billion) in new capital. And the Spanish government said the nation’s banking sector will need to raise around €50 billion in additional provisions to deal with property assets gone bad. Read Europe Markets.

France saw borrowing costs rise slightly at the 10-year level as it sold €8 billion of bonds in a closely watched auction.

Developments in Europe have at times overshadowed improving U.S. economic data, strategists noted.

Falling inflation pressures and a slowly improving outlook for jobs and other elements of the economy could help sustain a further rise for U.S. stocks in early 2012, said Kully Samra, branch director at Charles Schwab U.K., in a note.

“We’ve seen recession fears fade as consistently improving data have emerged, but stocks have largely ignored the positive developments in the U.S. picture as international concerns have seemingly dominated attention,” he said. That said, investors may be underestimating how much time Europe will take to get the debt crisis under control, Samra said.

“We believe a mild recession in Europe may be priced into markets at this point, as it is frequently discussed. However, extending the time to stabilize the situation may only elongate and deepen a recession in Europe, and markets may not be appreciating the risk of a longer recession in Europe and the negative implications for global growth,” he said.

Retail reports

U.S. retailers offered mixed results for holiday sales in December, with Costco Wholesale Corp. COST -1.68%  reporting U.S. sale-store sales excluding fuel climbed 6% during the month from the year-ago period. Target Corp. TGT +1.32%  , however, lowered its earnings expectations and reported revenue at stores open at least a year below analysts’ estimates.

The Institute for Supply Management’s index measuring activity outside the manufacturing sector in December is set for release at 10 a.m. Eastern. Economists expect the index to rise to 53.3% from 52% in November.

Wall Street finished mostly higher Wednesday after a round of strong auto sales data for December and signs of strong post-holiday shopping.

The Dow Jones Industrial Average DJIA -0.34%  ended the day with a gain of 21.04 points at 12,418.42, its highest close since July 26. The S&P 500 SPX -0.20%  gained 0.24 point to finish at 1,277.30, while the Nasdaq Composite Index COMP +0.17%  shed 0.4 point to settle at 2,648.36.

Kate Gibson is a reporter for MarketWatch, based in New York. William L. Watts is a reporter for MarketWatch in Frankfurt.