* IMF to reevaluate U.S. growth forecast if no budget deal
* Banks, materials may see biggest hit on sequester
* Groupon rallies in premarket as chief executive leaves
* Futures down: Dow 58 pts, S&P 7.6 pts, Nasdaq 12.75 pts
By Ryan Vlastelica
NEW YORK, March 1 (Reuters) - U.S. stock index futures were
lower on Friday, indicating a weak start to the month of March,
as investors looked ahead to U.S. government budget cuts that
were widely expected to take effect at the end of the day.
Equities have been on a tear lately, rising for four
straight months to approach five-year highs while the Dow
climbed to within striking distance of an all-time high. Any
declines have been shallow or short-lived, with investors
jumping in to buy on any dip.
The gains have come on the back of strong corporate earnings
and an accommodative Federal Reserve. In that environment, many
investors have shrugged off the potential impact of the
sequester, $85 billion in spending cuts across federal
government agencies that economists expect will shave half a
percentage point off U.S. economic growth.
"Conditions are ripe for anxiety and fear to return to the
market, especially given how high we've risen, and the sequester
that could be a catalyst that reignites fear in the market,"
said James Dailey, portfolio manager of TEAM Asset Strategy Fund
in Harrisburg, Pennsylvania.
Dailey said that if the market drops below lows hit earlier
this week, "that could be the start of a pullback that takes us
down as much as 10 percent."
The spending cuts will take effect just before midnight
Friday unless there is a last-minute deal, which is considered
The International Monetary Fund said that if the cuts take
effect, it would have to reevaluate its growth forecasts for the
U.S. and the global economy.
Cyclical companies like banks and materials stocks, which
are closely tied to the pace of economic growth, are likely to
be among the hardest hit in the short term. Bank of America
fell 1.2 percent to $11.10 in premarket trading while
Chevron Corp slid 0.6 percent to $116.43.
S&P 500 futures fell 7.6 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 slid 58
points and Nasdaq 100 futures lost 12.75 points.
For the week, the Dow is up 0.4 percent while both the S&P
and Nasdaq are down less than 0.1 percent. Both the Dow and S&P
climbed more than 1 percent in February, slimmer gains than in
January as equities grappled with uncertainties in Europe and
Federal Reserve policy.
Economic data on tap for Friday includes the final Thomson
Reuters/University of Michigan sentiment index, which is seen
holding steady at 76.3. Personal income and spending data will
also be released, along with January construction spending,
which is seen rising 0.4 percent. The Institute for Supply
Management's February manufacturing index is expected to dip to
52.5 from 53.1 in the previous month.
Overseas, China's factory growth cooled to multi-month lows
in February as domestic demand dipped, and euro zone
manufacturing activity appeared no closer to recovery last
month, as a dire performance in France offset a return to growth
"The weakness in overseas data is increasingly drawing
people's attention, and as that gets worse the market will
continue to struggle," Dailey said.
Groupon Inc gained 4.2 percent to $4.72 in
premarket trading a day after the online coupon company fired
its chief executive officer in the wake of weak quarterly
Gap Inc reported fourth-quarter earnings that beat
expectations and boosted its dividend by 20 percent, while
Salesforce.com Inc posted sales that beat consensus
forecasts, sending shares up 4.6 percent to $177 before the
U.S. stocks ended flat on Thursday, giving up modest gains
late in the session. The Dow Jones Transportation Average
, seen as a bet on future growth, hit a record intraday
high earlier in the session.