- Pre-Market Indications

Wednesday, September 22, 2010

Indications: Stock futures drop, gold rallies after Fed

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By Polya Lesova and Nick Godt, MarketWatch

NEW YORK (MarketWatch) â€" Stock futures Wednesday pointed to a lower opening on Wall Street, as investors sought a safe haven in gold after the U.S. Federal Reserve warned of deflation and a slowing recovery.

Gold futures rallied to new highs above $1,290 an ounce, while the U.S. dollar fell sharply against its major rivals.

Futures on the Dow Jones Industrial Average fell 17 points to 10,677 and S&P 500 futures dropped 2.0 points to 1,132.70.

Nasdaq 100 futures slipped 9.50 points to 1,976.00.


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U.S. stocks ended mixed on Tuesday after the Federal Reserve said it’s “prepared to provide additional accommodation if needed to support the economic recovery.” The central bank also cautioned that inflation is likely to remain subdued for some time.

“What the FOMC [Federal Open Market Committee] said laid the groundwork for further quantitative easing in the future,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.

“The Fed can do little about the “jobs” side of the equation, but remains concerned about the value of assets, which includes equities and real estate,” he said in a note to clients.

European stocks also traded deep into negative territory, with the Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:SXXP 261.19, -3.82, -1.44%)  dropping 1.3%. Asian markets finished mixed, with Japanese exporters weighing on the Nikkei Stock Average. Hong Kong stocks hit a fresh five-month high as property developers gained.

Gold futures, meanwhile, continued their record-breaking climb. Gold for December delivery /quotes/comstock/21e!f:gc\z10 (GCZ10 1,292, +17.60, +1.38%)  soared to an intraday high of $1,298 an ounce on Globex. The contract recently gained $22.20 to $1,296.50 an ounce.

BNP Paribas raised its estimates for gold prices and now expects them to average $1,200 an ounce in 2010 and $1,290 an ounce in 2011.

“We have raised our forecast to reflect the latest bullish developments for the gold market, notably the higher probability assigned to quantitative easing in the U.S. and a weaker U.S. dollar than previously forecast,” the bank said in a research report.

In the currency markets, the euro gained 1% to $1.3403 and the British pound advanced to $1.5639. The dollar index /quotes/comstock/11j!i:dxy0 (DXY 79.83, -0.61, -0.76%) , which tracks the performance of the greenback against a basket of other major currencies, fell 0.8% to 79.765.

The economic calendar is thin, with the FHFA house-price index due after the U.S. stock markets open.

On the corporate front, General Mills Inc. /quotes/comstock/13*!gis/quotes/nls/gis (GIS 36.99, +1.32, +3.70%)  reported that its fiscal first-quarter earnings rose to 70 cents a share from 62 cents a share in the same period a year ago.

Shares of Adobe Systems Inc. /quotes/comstock/15*!adbe/quotes/nls/adbe (ADBE 26.74, -6.20, -18.83%)  dropped 21% in premarket trade after its fourth-quarter earnings and revenue forecast fell below market expectations.

Elsewhere in the technology sector, Microsoft Corp. /quotes/comstock/15*!msft/quotes/nls/msft (MSFT 24.45, -0.70, -2.78%) announced late Tuesday it will raise its quarterly dividend payable to shareholders to 16 cents a share, from 13 cents a share. Its shares fell 1% ahead of the open.

Also in the spotlight, Swiss pharmaceutical giant Novartis AG /quotes/comstock/13*!nvs/quotes/nls/nvs (NVS 56.21, -0.25, -0.44%)   /quotes/comstock/06p!novn (CH:NOVN 55.45, -1.00, -1.77%)  said the U.S. Food and Drug Administration has approved its multiple-sclerosis drug Gilenya.

Polya Lesova is reporter for MarketWatch, based in Frankfurt. Nick Godt is MarketWatch's markets editor, based in New York.

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