NEW YORK (MarketWatch) -- U.S. stock futures slumped Thursday after the Labor Department reported weekly jobless claims hit their highest level since mid-December. The report added to investor worries about Europe's national debts and further offset the impact of Cisco Systems' upbeat earnings report.
Early reports had the government reporting initial jobless claims rose 8,000 to 480,000, more than expected, while U.S. productivity climbed 6.2% in the fourth quarter.
The jobless data "reflects a private sector that still remains very reluctant to add workers," said Peter Boockvar, equity strategist at Miller Tabak.
S&P 500 futures dropped 9.6 points to 1,086.8 and Nasdaq 100 futures fell 13.25 points to 1,772.25. Futures on the Dow Jones Industrial Average dropped 79 points.
U.S. stocks closed lower Wednesday after two winning sessions, hurt as Pfizer's earnings and outlook disappointed. The Dow Jones Industrial Average fell 26 points and the S&P 500 dropped 6 points, while the Nasdaq Composite rose slightly.
The euro fell to a seven-month low, as news on Wednesday that Portugal's finance ministry cut the size of a bond issue continued to make an impact. See related story.TODAY'S INTERNATIONAL MARKET STORIES
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The credit-default swaps on Portugal and Greece, which on Wednesday won European Commission support for its budget cut plan, deteriorated, and stock markets in Portugal, Spain and Greece all dropped sharply. See related Europe Stocks story.
Concerns about the periphery will likely be raised in European Central Bank President Jean-Claude Trichet's press conference.
The Bank of England called a halt to its $319 billion series of bond purchases while leaving its key lending rate unchanged at a record low 0.5%, as was expected. See Bank of England story.
The ECB kept interest rates steady at 1%.
In the U.S., retailers were releasing same-store sales. The Limited /quotes/comstock/13*!ltd/quotes/nls/ltd (LTD 20.18, -0.08, -0.39%) and Costco /quotes/comstock/15*!cost/quotes/nls/cost (COST 58.78, +0.36, +0.62%) each topped expectations.
Also Cisco Systems /quotes/comstock/15*!csco/quotes/nls/csco (CSCO 23.31, +0.24, +1.04%) rose 2% in pre-market trade after the company reported a 23% profit rise and said current quarter sales may grow as much as 26%. See Cisco story.
"We think a combination of high traffic growth, new product cycles, pent up demand and the migration towards deploying Ethernet broadly can fuel further improvement," said Simon Leopold, an analyst at Morgan Keegan, in a note to clients.
Shares of GlaxoSmithKline /quotes/comstock/13*!gsk/quotes/nls/gsk (GSK 38.68, -0.24, -0.62%) rose 0.7% after saying fourth-quarter profit surged 66% and expanding its restructuring program.
Hard-hit Toyota Motor /quotes/comstock/13*!tm/quotes/nls/tm (TM 71.44, -2.05, -2.79%) drifted 1.3% lower. The Japanese automaker that's been slammed by worries over its accelerators reported a fiscal third-quarter profit of $1.68 billion which handily topped estimates, and the company upped its fiscal year outlook. See Toyota story.
The Bank of England Suspends QE
As expected, the Bank of England suspended QE. This may have given a vote of confidence in the economy and lifted sterling and gilts but risks both of a double dip recession as well as a hung Parliament remain.
The new forecast includes the impact on sales, and recall costs, from accelerator-related problems. But the impact from problems related to the newest Prius model hasn't been factored in.
The Nikkei 225 fell 0.5% in Tokyo, which closed before Toyota and Sony reported earnings.
Oil futures fell 1.31% to $76.08, extending recent losses, as U.S. data showing a rise in crude inventories continued to weigh on sentiment and rekindled concerns over weakness in energy demand. Gold futures fell $9.2 an ounce to $1,102.8
Yields on 10-year Treasury bonds fell 5 basis points to 3.66%.
Steve Goldstein is MarketWatch's London bureau chief. Kate Gibson is a reporter for MarketWatch, based in New York.