US stock index futures fell amid possible budget shutdown

U.S. stock-index futures retreated significantly for a second day as politicians could not reach an agreement over the federal budget, threatening a U.S. government shutdown starting tomorrow.

Standard & Poor’s 500 Index futures expiring in December dropped 0.8% to 1,675.20 as of 7:28 a.m. in London, heading for the lowest close in three weeks. Future contracts on Dow Jones Industrial average fell 0.8%, Nasdaq futures sank by 0.6%.

Lawmakers have till tomorrow to resolve their differences, otherwise as many as 800,000 federal employees would be on furlough and national parks and Internal Revenue Service call centers may close. Even if the spending clash is resolved, lawmakers would immediately move to the next fiscal dispute over raising the $16.7 trillion debt ceiling.

“If they shut down the government, it’s not good for the economy,” said for Bloomberg, Ali Jalai, a Singapore-based trader at Scotiabank, a unit of Canada’s Bank of Nova Scotia, one of the 21 primary dealers that trade directly with the Federal Reserve. “Government bonds are doing better, and I guess stocks are going to do a bit worse. Eventually they’re going to open the government, but there’ll be some damage done.”

Investors are likely to watch J.C. Penney shares to see if they rebound following a 30% drop during the week, the biggest loser in the S&P 500. The department store chain late Thursday secured funds via the sale of 84 million shares which weighed heavily on the stock.

Paychex is projected to report first-quarter earnings of 43 cents a share, according to a consensus survey by Thomson Reuters. “We expect the core payroll business to show continued weakness in fiscal 1Q at 3.0% growth,” Jason Kupferberg, an analyst at Jefferies, said in a note.

Diamond Foods is forecast to post a loss of 3 cents a share in the fourth quarter. The stock was upgraded to buy from hold with a price target of $28 at BB&T Capital Markets on Thursday.