- Pre-Market Indications

Tuesday, August 10, 2010

Indications: Stock futures fall ahead of Fed policy statement

Stock Assault 2.0 - Artificial Intelligence Stock Market Software Alert Email Print

By Polya Lesova, MarketWatch

FRANKFURT (MarketWatch) -- U.S. stock futures fell on Tuesday, as nervousness dominated sentiment ahead of the Federal Reserve's monetary-policy announcement later in the session and following weaker-than-expected import data from China.

Futures on the Dow Jones Industrial Average dropped 70 points to 10,596 and S&P 500 futures declined 8.30 points to 1,117.30.

Nasdaq 100 futures slipped 12.50 points to 1,901.20.

The Federal Open Market Committee is meeting on Tuesday to decide on interest rate and monetary policy. A statement from the Fed is expected at 2:15 p.m. Eastern time.

Recent data have indicated that the U.S. economic recovery is slowing, raising worries over the potential for a so-called double-dip recession. As a result, pressure is mounting on U.S. central bankers to take measures.

Markets Hub: markets start Fed countdown

The stock market is expecting the Federal Reserve to at least hint at something at its meeting on Tuesday to help jumpstart the economy, while the bond market is signaling a deeper slowdown. This comes amid the last gasp of corporate earnings, with Tyson Foods Inc. delivering strong results and McDonald's posting a big jump in sales. Is that also a signal of a deeper slowdown and a more discerning consumer? Paul Vigna and Michael Reid discuss

Still, many observers think the Fed will likely resist pressure to buy bonds for the time being, but it may adjust the language of its statement to show growing awareness of economic uncertainty.

"Based on the Fed's own words, this current level of uncertainty is actually common at this stage of the economic cycle," said Jeffrey Kleintop, chief market strategist at LPL Financial.

"We believe the Fed will remain on hold this week, but could undertake additional stimulus if the uncertainty lingers later this year," he said in a note.

In Asia, the Bank of Japan left its policy interest rate and economic outlook unchanged.

Before the Fed announcement, data on second-quarter productivity will be released at 8:30 a.m. Eastern, to be followed by wholesale inventories for June at 10 a.m. Eastern.

The Dow /quotes/comstock/10w!i:dji/delayed (DJIA 10,699, +45.19, +0.42%) rose 0.4% on Monday, snapping a two-day losing streak.

Asian, European stocks fall

Asian and European equities posted broad-based losses, with the Shanghai Composite index ending down 2.9%. The declines came after data showed that China's July trade surplus surged to $28.7 billion, as exports soared 38.1%.

However, imports rose 22.7%, showing a bigger-than-expected deceleration in import growth, partly a result of slowing domestic demand amid policy tightening.

"We have export growth in China easing but still relatively strong, a big Chinese trade surplus, an even bigger U.S. trade deficit, a weaker yuan relative to the euro and yen, but hardly any change against the dollar in recent weeks," said Brian Jackson from RBC Capital Markets in a note to clients. "These all suggest that pressure for further gains in the yuan against the dollar is likely to build."

In premarket trading, shares of MBIA Inc. /quotes/comstock/13*!mbi/quotes/nls/mbi (MBI 9.19, +0.32, +3.61%) rallied 7.7%. The bond insurer said late Monday that its second-quarter net profit rose to $1.3 billion, or $6.32 a share, from $895 million, or $4.30 a share, in the same period a year ago.


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On the negative side, shares of InterContinental Hotels Group PLC /quotes/comstock/13*!ihg/quotes/nls/ihg (IHG 18.07, -0.19, -1.04%) /quotes/comstock/23s!e:ihg (UK:IHG 1,074, -50.00, -4.45%) fell 5.6% in premarket trading. The firm said that global revenue per available room rose in the second quarter, but it warned that the economic environment remains uncertain.

Also in the sector, shares of Tui Travel PLC /quotes/comstock/23s!e:tt. (UK:TT. 207.00, -18.60, -8.24%) tumbled 8% in London trading after the company reported a wider net loss and warned that fiscal-year profit will be at the low end of expectations.

The Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:SXXP 259.93, -2.33, -0.89%) fell 0.8% in intraday trading.

On the deals front, French utility GDF Suez /quotes/comstock/24s!e:gsz (FR:GSZ 26.34, -0.45, -1.68%) announced it will merge some of its international operations with U.K.-based International Power /quotes/comstock/23s!a:ipr (UK:IPR 367.20, -12.80, -3.37%) , creating one of the world's biggest electricity generators.

GDF Suez also said its first-half net profit rose 9.3%, while International Power reported a 49% drop in profit. Read more on the firms.

Commodity prices also tracked equities lower. Crude-oil futures fell $1 to $80.48 a barrel in electronic trading on Globex.

Gold futures dropped $3 to $1,199.60 an ounce.

The dollar, meanwhile, gained against most of its major rivals. The dollar index /quotes/comstock/11j!i:dxy0 (DXY 81.11, +0.40, +0.49%) rose 0.3% to 80.959, while the euro /quotes/comstock/21o!x:seurusd (EURUSD 1.3157, -0.0066, -0.4991%) fell to $1.3178.

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

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