- Pre-Market Indications

Tuesday, November 23, 2010

Indications: U.S. futures drop on Koreas, Europe debt concerns

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By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) â€" U.S. stock futures fell sharply on Tuesday, as investors fretted over news of an exchange of fire between North and South Korea, and amid ongoing concern about Ireland's debt problems.

Losses for futures accelerated, with Dow Jones Industrial Average futures /quotes/comstock/21b!f:dj\z10 (DJZ10 11,064, -101.00, -0.90%)  trading down 100 points, or 0.9%, to 11,065, while those for the S&P 500 /quotes/comstock/21m!f:sp\z10 (SPZ10 1,184, -14.10, -1.18%)  fell 13.10 points, or 1.1%, to 1,185.

Futures for the Nasdaq 100 index /quotes/comstock/21m!f:nd\z10 (NDZ10 2,134, -20.25, -0.94%)  slumped 20.75 points, or 1%, to 2,134.

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.

Stock futures 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 two Koreas

“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. 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 in the prior session, but bounced off earlier lows amid worries over debt woes in Ireland, along with news of a fresh insider-trading investigation at three hedge funds.

The Nasdaq Composite index /quotes/comstock/10y!i:comp (COMP 2,532, +13.90, +0.55%)  managed a small gain.

European stocks were deep in negative territory on Tuesday, also rattled by unrest in the Koreas. Also weighing was political instability in Ireland, with fears 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 pre-opening trade, U.S.-listed shares of Bank of Ireland /quotes/comstock/13*!ire/quotes/nls/ire (IRE 2.22, -0.45, -16.85%)   /quotes/comstock/30b!bir (IE:BIR 0.28, -0.11, -27.51%)  tumbled 30%. 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.

Economic data on the schedule for Tuesday include a third-quarter revision of U.S. gross domestic product, due at 8:30 a.m. Eastern time.

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 ahead of the market open. Campbell Soup Co. /quotes/comstock/13*!cpb/quotes/nls/cpb (CPB 34.83, +0.18, +0.52%) said it earned 82 cents in the first quarter against 87 cents in the year-ago period on sales of $2.17 billion. The company said it sees 2011 EPS growth of 2% to 4%.

Hormel Foods Corp. /quotes/comstock/13*!hrl/quotes/nls/hrl (HRL 47.93, +0.29, +0.61%)  reported fourth-quarter earnings per share of 90 cents against 77 cents in the year-ago period on sales of $2.1 billion.

Shares of clothing retailer J. Crew Group Inc. /quotes/comstock/13*!jcg/quotes/nls/jcg (JCG 37.65, +1.16, +3.18%)  jumped 22% in pre-opening trade on a report in The Wall Street Journal that a couple of private equity firms are nearing a deal worth $43.50 in cash, or $3 billion, to take the firm private. A deal could be announced as soon as Tuesday.

Brown Shoe Co. /quotes/comstock/13*!bws/quotes/nls/bws (BWS 12.19, -0.16, -1.30%)  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 year earlier. Adjusted earnings were 45 cents versus 42 cents. The company estimated adjusted profit at $1 to $1.05 a share for 2010.

Health-care giant Johnson & Johnson /quotes/comstock/13*!jnj/quotes/nls/jnj (JNJ 63.62, -0.21, -0.33%)  said it’s recalling children’s-strength Motrin and Benadryl products owing to manufacturing issues. The company also said that products are safe for consumers to use.

Shares of Hewlett-Packard Co. /quotes/comstock/13*!hpq/quotes/nls/hpq (HPQ 43.25, +0.76, +1.79%)  rose 2% in premarket trading after the company late Monday reported strong fiscal fourth-quarter results. Its outlook was better than expected.

Stocks in Hong Kong closed off 2.7%, partly on fears 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 rose 40 cents to $1,358.10 an ounce. January crude oil futures fell $1.10 to $80.64 a barrel.

Barbara Kollmeyer is an editor for MarketWatch in Madrid.

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