Indications: U.S. futures drop on Korean tensions

By Barbara Kollmeyer and Nick Godt, MarketWatch

NEW YORK (MarketWatch) â€" U.S. stock futures fell sharply Tuesday, as investors fretted over news of an exchange of fire between North and South Korea, while concerns about Ireland's debt problems continued.

Dow Jones Industrial Average futures /quotes/comstock/21b!f:dj\z10 (DJZ10 10,983, -182.00, -1.63%)  slid 106 points, or 1%, to 11,059, while those for the S&P 500 /quotes/comstock/21m!f:sp\z10 (SPZ10 1,177, -20.70, -1.73%)  fell 13.70 points, or 1.1%, to 1,184.

Futures for the Nasdaq 100 index /quotes/comstock/21m!f:nd\z10 (NDZ10 2,109, -45.50, -2.11%)  slumped 20.75 points, or 1%, to 2,133.75.

North, South Korea exchange fire

North Korea fires artillery shells at buildings on a South Korean island, prompting an exchange of fire. Video courtesy of Reuters.

Investors were unsettled by reports that North Korea launched dozens of rounds of artillery at a South Korean island near the two nations’ western border. South Korean forces then reportedly fired back. According to Reuters, South Korea’s military is now at its highest level of peacetime alert. See full story on the Korean conflict.

“As this unfolds during the day, it may be one of the major talking points in the week, especially in the American market, where everyone is not focused on what’s going on and focused on the holidays,” said Will Hedden, sales trader at IG Index.

He said volumes are thinning out ahead of Thursday’s U.S. Thanksgiving holiday. “With the fact that it is quiet, we’ve still got these wide economic topics,” he said. “It could still be quite choppy, but there’s not much out there to suggest American investors would be interested in buying ahead of the Thanksgiving holiday.”

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U.S. stocks closed mostly down Monday, although they bounced off earlier lows amid worries over Ireland’s debt woes and news of a fresh insider-trading investigation at three hedge funds.

The Nasdaq Composite index /quotes/comstock/10y!i:comp (COMP 2,488, -44.47, -1.76%)  managed a small gain.

European stocks were deep in negative territory Tuesday, also rattled by unrest on the Korean Peninsula. Also weighing was political instability in Ireland, with fears that Prime Minister Brian Cowen may have trouble pushing austerity measures â€" required for a rescue package â€" through parliament. Cowen said he would call for early elections in January once the budget is passed.

“The focus today is where the political situation sends the market there. If it is to descend into disorder in the political situation, that’s going to definitely help markets decide where the contagion will go,” said Hedden. “If that happens, Portugal, maybe Spain, will be next in line to be sold.”

In premarket trade, U.S.-listed shares of Bank of Ireland /quotes/comstock/13*!ire/quotes/nls/ire (IRE 1.72, -0.50, -22.53%)   /quotes/comstock/30b!bir (IE:BIR 0.29, -0.10, -24.94%)  tumbled 29%. Patrick Honohan, governor of the Central Bank of Ireland, said selling Ireland’s banks to foreign buyers may be desirable, according to a report by Dow Jones Newswires.

Stock futures held onto sharp losses ever after the U.S. government revised its estimate of economic growth to a 2.5% annual rate in the third quarter, compared with 2% previously. Economists were predicting a revision to about 2.4%. Read more on the GDP.

Still ahead, October existing-home-sales data are due for release at 10 a.m. Eastern, and minutes of the Federal Open Market Committee meeting held earlier this month will be released at 2 p.m. Eastern.

A handful of companies reported their quarterly results before the market open. Campbell Soup Co. /quotes/comstock/13*!cpb (CPB 34.20, -0.63, -1.81%) said it earned 82 cents a share in the first quarter, down from 87 cents a share in the year-ago period, on sales of $2.17 billion. The company said it sees 2011 earnings-per-share growth of 2% to 4%.

Hormel Foods Corp. /quotes/comstock/13*!hrl (HRL 49.39, +1.46, +3.05%)  reported fourth-quarter earnings of 90 cents a share, compared with 77 cents a share in the year-ago period, on sales of $2.1 billion.

Shares of J. Crew Group Inc. /quotes/comstock/13*!jcg/quotes/nls/jcg (JCG 43.85, +6.20, +16.47%)  jumped 22% in preopen trade on a report in The Wall Street Journal that private-equity firms are near a deal worth $43.50 a share in cash, or $3 billion, to take the clothing retailer private. A deal could be announced as soon as Tuesday.

Brown Shoe Co. /quotes/comstock/13*!bws (BWS 14.20, +2.01, +16.49%)  shares moved up 11% in premarket trading. The St. Louis footwear firm reported fiscal third-quarter net income reached 42 cents a share from 38 cents a share in the year-earlier period. Adjusted earnings in the latest quarter were 45 cents a share versus 42 cents. The company forecast 2010 adjusted profit of $1 to $1.05 a share.

Health-care giant Johnson & Johnson /quotes/comstock/13*!jnj/quotes/nls/jnj (JNJ 62.81, -0.81, -1.27%)  said it’s recalling children’s-strength Motrin and Benadryl products, owing to manufacturing issues. The company also said the products are safe for consumers to use.

Shares of Hewlett-Packard Co. /quotes/comstock/13*!hpq/quotes/nls/hpq (HPQ 43.53, +0.28, +0.65%)  rose 2% in premarket trading after the company late Monday reported strong fiscal fourth-quarter results. Its outlook was better than expected. Read about Hewlett-Packard’s results.

Stocks in Hong Kong closed off 2.6%, partly on fears that big banks may curb lending, notably to the property sector. Korean worries also crept in, with China’s Shanghai Composite losing 1.9%.

The dollar was stronger across the board, while gold futures for December fell $3.20, or 0.2%, to $1,361.30 an ounce. January crude-oil futures fell $1.28 to $80.46 a barrel.

Barbara Kollmeyer is an editor for MarketWatch in Madrid. Nick Godt is MarketWatch's markets editor, based in New York.

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