* S&P 500 comes off three straight days of gains
* Jobless claims up more than expected in latest week
* Morgan Stanley, Travelers rally after results
* Futures down: Dow 9 pts, S&P 4.2 pts, Nasdaq 10.5 pts
By Ryan Vlastelica
NEW YORK, Oct 18 (Reuters) - U.S. stock index futures pointed to a lower open on Thursday in the wake of weaker-than-expected labor market data.
Weekly jobless claims rose sharply in the latest week to 388,000, compared with analysts’ estimates for a rise to 365,000. The previous week’s reading was revised up slightly to 342,000 from 339,000.
“I’ve expected the market to crack 100 times; we have to go down on this. This could be the start of a correction,” said Uri Landesman, president at Platinum Partners in New York.
“On the one hand, you never want to respond too much to one data point, but on the other, this market is priced for perfection.”
The benchmark S&P 500 index has risen 2.3 percent over the past three days, putting it just 0.33 percent shy of the year’s closing high. Those gains have come on better-than-expected results from such companies as Johnson & Johnson and Goldman Sachs, though disappointments from IBM and JPMorgan Chase limited gains.
Morgan Stanley rose 1.9 percent to $18.85 in premarket trading after reporting adjusted earnings that beat expectations on higher revenue from bond trading.
“What troubles me about the earnings we’ve seen from financials is that the standard businesses of lending and credit aren’t really there,” Landesman said. “I don’t see how the economy can expand in 2013 if our biggest lenders aren’t lending.”
A pair of Dow components also reported. Verizon Communications Inc had revenue that was slightly above expectations while Travelers Cos posted operating earnings that were much stronger than expected.
Verizon rose 0.5 percent to $44.96 before the bell while Travelers was up 2.2 percent, limiting losses in the Dow.
S&P 500 futures fell 4.2 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures lost 9 points and Nasdaq 100 futures fell 10.5 points.
Although it’s still early in the earnings season, results have been a bit better than anticipated. With 14 percent of S&P 500 companies having reported, 65 percent have beaten analysts’ expectations, ahead of the long-term average of 62 percent.
Still, earnings are seen falling 1.7 percent from a year ago, according to Thomson Reuters data, a little better than a forecast for a drop of 2.3 percent earlier in the week.
While U.S. company earnings have been the primary driver over the past two weeks, market participants continue to closely watch Europe for how it may deal with debt in Spain and Greece.
EU leaders meet Thursday at a summit where they will try to bridge differences over plans for a banking union, seen as the first stage in a long-term strategy to overhaul the monetary union.
Still, no substantial decisions are expected, keeping investors cautious over how the region will tackle its three-year-old debt crisis. European shares were down less than 0.1 percent.
At 10:00 a.m., the Philadelphia Federal Reserve Bank releases its September business activity survey. For the survey’s main index, analysts see a reading of 1.0 compared with -1.9 in August.
In China, the country’s GDP growth rate in the third quarter suggested it may have hit the floor of a seven-quarter-long downturn.
The S&P 500 rose for a third straight day on Wednesday as housing starts hit a four-year high, but the Dow was pressured by IBM after it reported weaker revenue.