- Pre-Market Indications

Wednesday, April 7, 2010

Indications: U.S. futures drift before Bernanke speech, auction

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By Steve Goldstein, MarketWatch

LONDON (MarketWatch) -- U.S. stock futures drifted lower Wednesday ahead of a speech on economic challenges from Federal Reserve Chairman Ben Bernanke, as Treasury Secretary Timothy Geithner headed to Beijing to possibly address one of those challenges: the weak Chinese yuan.

S&P 500 futures fell 4.8 points to 1,180.80 and Nasdaq 100 futures fell 5.25 points to 1,973.50. Futures on the Dow Jones Industrial Average lost 33 points.

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U.S. stocks ended with little movement Tuesday, with the blue chip Dow Jones Industrial Average falling 3 points while the S&P 500 and Nasdaq Composite made small advances.

Minutes from the last Federal Reserve meeting showed that the central bank doesn't interpret a promise to keep rates at ultralow levels for an "extended period" to mean six months, and a report that Greece was trying to avoid International Monetary Fund involvement in a backstop sent bond yields in that country surging.

While Greek bond yields are surging, those of the U.S. 10-year /quotes/comstock/20m!i:tnx (TNX 39.51, -0.17, -0.43%) are flirting around the 4% mark, leading the market to debate whether the rise is due to an improving economy or bond investors struggling to cope with surging supply, which on Wednesday includes $21 billion of 10-year notes.

Ahead of the auction, 10-year yields were 3.95%.

Patrik Schowitz, an equity strategist at Bank of America Merrill Lynch, points out that U.S. yields have advanced more quickly than most European nations.


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"So unless you think that government funding worries are far worse in the U.S., growth looks to be the main driver for yields," he said in a note to clients.

Bernanke will be speaking about economic challenges in a speech due for delivery at 1:30 p.m. Eastern, while speculation around the yuan will also be in the spotlight as a spokesman announced Geithner is heading to Beijing to meet Vice Premier Wang Qishan, who is responsible for economic affairs.

Geithner over the weekend delayed a report on whether China is a currency manipulator. There is speculation that China may extend the band in which the yuan can move against the dollar from plus or minus 0.3% a day to plus or minus 0.5%. See related story.

Goldman Sachs /quotes/comstock/13*!gs/quotes/nls/gs (GS 172.90, -0.26, -0.15%) will be in the spotlight as the bank is expected to say in its annual letter to shareholders that it didn't put its own interests ahead of its clients. The New York firm reiterated that it didn't bet against clients by using short positions that it took on before the residential real estate market crashed, The Wall Street Journal reported.

Daimler /quotes/comstock/13*!dai/quotes/nls/dai (DAI 47.70, -0.27, -0.56%) , Nissan /quotes/comstock/11i!nsan.y (NSAN.Y 17.65, -0.03, -0.17%) and Renault announced a long-expected alliance on small cars that includes buying minority stakes in each other. See story.

Family Dollar /quotes/comstock/13*!fdo/quotes/nls/fdo (FDO 37.79, +0.30, +0.80%) rose over 4% after reporting a 33% quarterly profit rise. Monsanto /quotes/comstock/13*!mon/quotes/nls/mon (MON 69.80, -0.64, -0.91%) edged 0.2% lower after seeing 2010 adjusted earnings at the low end of a previously announced range and saying it's unlikely 2012 gross profit will be double its 2007 result.

Fears of tighter Chinese policy dragged the Shanghai Composite down 0.3%, but most other Asian stock markets rose Wednesday, with the Hang Seng up 1.8% in a catch-up rally. European stocks meanwhile sported modest losses in early afternoon trade.

Ahead of weekly energy supplies data, oil futures fell 95 cents to $85.89 a barrel.

Steve Goldstein is MarketWatch's London bureau chief.

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