US stock futures plunge after anemic growth report

Stock futures plunged early Friday after the government said that economic growth slowed in the first half of the year to its slowest pace since the recession ended. Congress’ failure to raise the nation’s borrowing limit dragged on markets in the U.S. and abroad.

High gas prices, slow spending by consumers and government cutbacks caused the economy to expand at an annual rate of 1.3 percent in the April-June period, the Commerce Department reported. It revised the first-quarter rate of growth downward to 0.4 percent.

Consumer spending barely rose, after a healthy increase in winter. People spent sharply less on long-lasting manufactured goods, and government spending fell for the third straight quarter.

Ahead of the opening bell, Standard & Poor’s 500 futures fell 12 points, or 1 percent, to 1,284. Dow Jones industrial average futures dropped 122, or 1 percent, at 12,070. Nasdaq 100 futures skidded 18, or 0.8 percent, to 2,352.

Traders are growing more anxious about Congress’ failure to reach a deal as House Republicans try for the third straight day to pass a bill to raise the borrowing limit while cutting federal spending by nearly $1 trillion. The bill stands almost no chance of surviving the Democratic-controlled Senate.

The debate over increasing the nation’s borrowing authority has cast a shadow of uncertainty over the financial markets all summer. Congress has only four days to act before the government could run out of money to meet its financial obligations. If lawmakers can’t reach a deal before Aug. 3, the government might be short on cash to meet its financial obligations.

A default by the U.S. would increase borrowing costs for the government and consumers. That would dig the nation into a deeper deficit hole and discourage people from borrowing to by homes and cars.

The stock market’s losses overshadowed any concerns about the value of U.S. bonds. Traders flocked to safety, pushing the yield on the benchmark 10-year Treasury note to 2.88 percent from 2.95 percent on Thursday. As demand for bonds increases, bondholders demand lower interest rates from the government and yields fall.

In corporate news, shares of Yahoo Inc. rose 4 percent ahead of the market opening after the company said it had reached a deal with Alibaba Group, based in China, over the spinoff of that company’s online payment system, Alipay. The deal allows Yahoo to be compensated for the spinoff through its 43 percent stake in Alibaba.

Shares of travel website operator Expedia Inc. surged 5 percent after the company said its second-quarter net income rose more than expected as bookings increased and prices for plane ticket and hotel rooms rose.

Drugmaker Merck & Co. said its second-quarter profit nearly tripled from a year ago, and announced plans to cut 11,830 jobs. But shares slipped as the broader futures market sold off.

Shares of Chevron Crop. also traded lower despite strong second-quarter earnings. The company said its profit jumped 43 percent, beating analysts’ estimates, as higher oil and gasoline prices offset a decline in production. Shares edged down a fraction of a percent.