Wall Street set to drop at open as selling pressure mounts

NEW YORK (Reuters) - U.S. stocks were set for a sharply lower open on Wednesday as economic data did little to stem worries over the health of the world economy or that corporate merger activity may be slowing.

The benchmark S&P 500 had eked a tiny gain at the close a day earlier following three sessions of declines spurred by concern over plunging oil prices, the potential impact of global economic weakness on U.S. earnings and the spread of Ebola.

The S&P <.SPX> has lost 6.6 percent since its Sept. 18 record closing high and is now up just 1.6 percent for the year, while the Dow <.DJI> is down 1.6 percent since Dec. 31.

Futures were little changed earlier Wednesday before dropping steeply in heavy trading, reflecting a recent jump in volatility in the equity markets.

Aside from concerns about the global economy, Chicago-based AbbVie said it was reconsidering its $55 billion takeover of the company weeks after the U.S. government moved to curb deals designed to reduce tax, throwing the vitality of merger and acquisition activity into doubt.

U.S.-listed shares of Shire tumbled 25.9 percent to $182.24 before the opening bell while AbbVie shares declined 4.1 percent to $51.90.

"This is the bottom line, the market is technically broken, expect this volatility because technically it needs to build a base again, so any news that would not necessarily have affected it as much will now affect it more - it?s amplified," said Ken Polcari, director of the NYSE floor division at O?Neil Securities in New York.

Economic data failed to ease concerns about a slowing global economy, as retail sales fell 0.3 percent in September, worse than an expected 0.1 percent decline. Producer prices fell in September for the first time in over a year, a sign inflation may be having difficulty gaining traction, while manufacturing activity in New York slowed to its weakest pace since April.

S&P 500 e-mini futures were down 22.75 points and fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract, indicated a sharply lower open. Dow Jones industrial average e-mini futures <1YMc1> fell 153 points and Nasdaq 100 e-mini futures lost 48.25 points.

As earnings season picks up speed, Bank of America shares were off 0.7 percent to $16.42 in premarket after posting its third-quarter results.

Later in the session at 10:00 a.m., business inventories for August are due, while the Federal Reserve's Beige Book on business activity across the nation is expected at 2:00 p.m.

S&P 500 companies are expected to show earnings growth of 6.4 percent in the third quarter, according to Thomson Reuters data, with revenue growth expected at 4 percent.

(Editing by Bernadette Baum)

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