By Barbara Kollmeyer, MarketWatch

Analyst: S&P 500 could be about to start a technical correction

U.S. stock futures took a sudden, sharp dive south on Friday, on the heels of selling of Chinese index futures after a change in rules.

Chinese regulators will now allow fund managers to lend stocks for short selling (http://www.marketwatch.com/story/stock-futures-tumble-traders-blame-china-regulatory-news-2015-04-17), media reports said Friday.

"This is apparently weighing heavily on Chinese index futures, which is dragging equities lower across the board. Europe is getting battered now as well," said Craig Erlam, senior market analyst OANDA. Futures of H-shares, Chinese stocks listed in Hong Kong, fell 5%.

"What we're seeing right now is a combination of panic and technical levels being wiped out and exacerbating the move lower," he said.

At the same time, traders' access to Bloomberg terminals went down around the same time Asian markets closed at about 3:15 a.m. Eastern Time. The company says it is working to restore access to the Bloomberg Professional service, the company's key product. Read: Bloomberg Terminal goes down, traders get up to fun (http://www.marketwatch.com/story/bloomberg-terminal-goes-down-traders-get-up-to-fun-2015-04-17)

Futures for the Dow Jones Industrial Average (YMM5) slid 125 points, or 0.7%, to 17,916, while those for the S&P 500 index (ESM5) dropped 12.80 points, or 0.7%, to 2,088. Futures for the Nasdaq-100 index (NQM5) lost 37 points, or 0.8%, to 4,378.25.

European stocks also slumped on the back of the news from China, with the Stoxx Europe 600 index off 1.4%.

Stocks closed slightly lower on Thursday (http://www.marketwatch.com/story/us-stocks-futures-waver-with-goldman-earnings-fed-speakers-in-focus-2015-04-16), getting only a brief bump from a handful of Fed members who suggested a near-term interest-rate hike might be less likely. The S&P 500 ended 0.5% shy of its all-time close of 2,117.39, reached March 2.

Investors will get an update on inflation, with consumer prices for March due at 8:30 a.m. Eastern Time. Economists surveyed by MarketWatch are forecasting a 0.3% rise, versus a 0.2% gain in the February. Core prices are expected to rise 0.2%, the same gain as February. Then the University of Michigan consumer sentiment survey for April is coming at 9:55 a.m. Eastern. Leading indicators for March will hit at 10 a.m. Eastern.

Correction ahead? A technical analyst told CNBC on Friday that he expects major global benchmarks to begin correcting over the next month. "I think the correction has started on the DAX, and the S&P 500 we are probably on the top today," Yacine Kanoun, managing director at PivotHunters, a U.K.-based portfolio management company, said Friday (http://www.cnbc.com/id/102595532).

Kanoun expects the expiration of options contracts on Friday to kick off a correction, and he expects the S&P 500 to come down 10% from its current peak. He sees the DAX bottoming at 11,650.

Need to Know: When sex isn't selling, it might be time to get defensive (http://www.marketwatch.com/story/when-sex-isnt-selling-it-might-be-time-to-get-defensive-2015-04-17)

Stocks to Watch: Ahead of the market open, General Electric(GE) reported a loss for the first quarter, sending the shares down 0.8% premarket. Shares in Honeywell International Inc.(HON) gained 2.1% in light premarket trade after the company posted higher profits (http://www.marketwatch.com/story/honeywell-beats-profit-expectations-but-misses-on-sales-and-cuts-outlook-2015-04-17) and upped its outlook for the year. Reynolds American Inc.(RAI) reported a rise in profit (http://www.marketwatch.com/story/reynolds-american-beats-profit-sales-estimates-2015-04-17) for the first quarter that beat estimates.

After Thursday's close, American Express Co.(AXP) posted a 6.5% gain in profit due to card-member spending. Shares slipped 1.1% in late trade after the payment-card company said (http://www.marketwatch.com/story/amex-profit-buoyed-by-card-member-spending-2015-04-16-16485228)its results were hurt by a stronger dollar.

Mattel Inc (http://www.marketwatch.com/story/amex-profit-buoyed-by-card-member-spending-2015-04-16-16485228).(MAT) shares rose nearly 7% in late trade after the toy maker posted a narrower-than-expected loss for the first quarter.

Advanced Micro Systems Inc.(AMD) could get hit in premarket. Shares fell nearly 9% after the chip maker posted a wider-fiscal first-quarter loss and weaker revenue.

Schlumberger NV(SLB) shares rose just over 2% in late trade. The oil-field services company said it would cut 11,000 more jobs after posting a 39% first-quarter earnings drop.

Other markets: In Asia, the Nikkei 225 posted a 1.2% drop, while the Shanghai Composite Index surged 2.2%. The dollar remained under pressure, while gold prices (CLK5) pushed higher.

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