Updated: Friday, 01 Mar 2013, 8:29 AM CST
Published : Friday, 01 Mar 2013, 7:20 AM CST
NEW YORK (AP) — U.S. stock futures slid Friday as $85 billion in mandatory federal spending reductions began to roll out on the same day that the government reported American incomes plunged in January at the fastest pace in two decades.
Dow Jones industrial futures slumped 60 points to 13,978. The broader S&P futures gave up 8.6 points to 1,504.70. Nasdaq futures are down 11.25 points to 2,726.75.
President Barack Obama has called congressional leaders to the White House to give both sides an opportunity to state their positions, but there is no anticipation of a deal being struck.
Markets this week have swung wildly, but seemed impervious to the showdown in Washington. The Dow came within a hair of an all-time closing high Thursday.
The consumer spending report from the Commerce Department was complicated by some of the same issues that led to the automatic budget cuts.
Income fell 3.6 percent in January, according to the report, the biggest drop since January 1993. But that comes after a solid 2.6 percent rise in December.
That may just be a pause for consumers, however. The December gain had reflected a rush by companies to pay dividends and bonuses before income taxes increased on top earners.
How higher payroll taxes and new budget cuts affects the mood of consumers is critical, as consumer spending drives about 70 percent of all economic activity in the U.S.
Rising housing prices and a steadily improving job market appear to have allowed people to shrug off the clash in Washington, but the recovery may be tested with so much less pocket money going into 2013 for Americans.
In January, Congress and the White House allowed a 2 percentage point cut in Social Security taxes to expire. A person earning $50,000 a year will have about $1,000 less to spend in 2013.
Later on Friday, Commerce reports construction spending figures, which has been driven by residential projects.
The National Association of Home Builders reported last week that confidence among U.S. homebuilders slipped this month from the 6 1/2 year high it reached in January.
Construction spending totaled $850.2 billion in 2012, an increase of 9.2 percent from the previous year.
Economists expect that construction spending grew 0.4 percent in January, according to a survey by FactSet.