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Monday, July 26, 2010

Indications: Stock futures waver as focus returns to earnings

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By Polya Lesova, MarketWatch

FRANKFURT (MarketWatch) -- U.S. stock futures wavered between small gains and losses on Monday, as traders focused on second-quarter earnings season now that European bank stress-test results are out of the way.

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S&P 500 futures edged down 1.60 points to 1,099 while Nasdaq 100 futures traded virtually unchanged at 1,873.50.

Futures on the Dow Jones Industrial Average fell 10 points to 10,376.

U.S. stocks ended with strong gains on Friday, buoyed by news that the majority of European banks have passed eagerly awaited stress tests.

The Dow /quotes/comstock/10w!i:dji/delayed (DJIA 10,425, +102.32, +0.99%) rose 1% in the session and gained 3.2% for the week.

"As far as the U.S. is concerned, the key thing is still the earnings," said Mike Lenhoff, chief strategist at Brewin Dolphin Securities in London. "By the end of the week, two thirds of the S&P 500 would have reported. The results should be quite good."

"The concerns people have had about loss of recovery momentum haven't been evident in these earnings," Lenhoff said.

Cigarette manufacturer Lorillard Inc. /quotes/comstock/13*!lo/quotes/nls/lo (LO 76.30, +0.39, +0.51%) is due to report second-quarter earnings on Monday morning. After the market closes, technology firm Sanmina-SCI Corp. /quotes/comstock/15*!sanm/quotes/nls/sanm (SANM 15.16, +0.52, +3.55%) will release quarterly results.

On the economic front, the home builders' index for June will be released at 10 a.m. Eastern time.

European shares edge down

The Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:SXXP 255.54, -0.43, -0.17%) reversed opening gains to trade down 0.3%. Germany's DAX stock index /quotes/comstock/30p!dax (DX:DAX 6,152, -14.08, -0.23%) also fell 0.3%.

Shares of Deutsche Bank AG /quotes/comstock/13*!db/quotes/nls/db (DB 64.54, +0.27, +0.42%) /quotes/comstock/11e!fdbk (DE:DBK 49.19, -0.62, -1.24%) slipped 1.4% after it and several other German banks didn't disclose the full details of their sovereign-debt holdings. The Financial Times reported that the German financial regulator had not pressured banks to make a full disclosure of their positions. Read more on banks.

Analysts continued to debate the credibility and rigor of the stress tests.

"One can question the merits of the outcome, but it's largely as anticipated," Lenhoff said. "It would have been most unlikely to have an outcome showing the European banking system in dire straits. The one source of comfort has to do with the fact that the formality of the exercise is over."

In London trading, shares of BP PLC /quotes/comstock/13*!bp/quotes/nls/bp (BP 36.86, +0.63, +1.74%) /quotes/comstock/23s!a:bp. (UK:BP. 407.55, +8.95, +2.25%) gained 2% following media reports suggesting that Chief Executive Tony Hayward is negotiating his departure with the firm's board of directors.

Robert Dudley is tipped to succeed Hayward as CEO, according to reports. Dudley, a BP managing director and former CEO of Russia's TNK-BP, took over day-to-day control of the company's cleanup efforts in the Gulf of Mexico in June.

BP said Monday that no final decision has been made on any management changes. Its board will hold a meeting this evening ahead of the company's announcement of second-quarter results on Tuesday. See more on BP.

Also in the energy sector, shares of Tullow Oil /quotes/comstock/23s!e:tlw (UK:TLW 1,228, +49.00, +4.16%) rose 3.2% after the firm announced it has discovered a major new oil field off the coast of Ghana.

In the currency markets, the dollar index /quotes/comstock/11j!i:dxy0 (DXY 82.43, -0.04, -0.04%) , which tracks the performance of the greenback against a basket of other major currencies, edged down 0.1% to 82.377. The euro /quotes/comstock/21o!x:seurusd (CUR_EURUSD 1.2907, +0.0006, +0.0465%) traded little changed at $1.2906.

September crude-oil futures fell 37 cents to $78.61 a barrel in electronic trading on the New York Mercantile Exchange.

Gold futures were flat at $1,188.30 an ounce.

Polya Lesova is a reporter for MarketWatch, based in Frankfurt.

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