MarketWatch.com - Pre-Market Indications

Tuesday, November 30, 2010

Indications: U.S. stock futures drop amid European worries

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By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) â€" U.S. stock futures were pointing to a lower start for Wall Street, with sentiment fragile amid continued fears of sovereign-debt contagion in Europe, while health-care giant Merck & Co. announced a new chief executive officer.

Ramping up earlier losses, futures for the Dow Jones Industrial Average /quotes/comstock/21b!f:dj\z10 (DJZ10 10,933, -106.00, -0.96%)  fell 37 points to 11,002, while those for the S&P 500 /quotes/comstock/21m!f:sp\z10 (SPZ10 1,176, -10.60, -0.89%)  dropped 4.2 points at 1,182.30.

Nasdaq 100 futures /quotes/comstock/21m!f:nd\z10 (NDZ10 2,123, -22.50, -1.05%)  slipped 11.25 points to 2,134.25.

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“What’s running in the market is a fear of a total meltdown within the euro-zone countries, and that also includes Italy now,” said Christian Tegllund Blaabjerg, chief equity strategist at Saxo Bank.

The premium demanded by investors to hold 10-year Spanish bonds over German bunds hit more than three full percentage points on Tuesday â€" the largest since the launch of the euro â€" as peripheral bond yields soared.

“Liquidity has dried up. It’s very, very scary,” said Blaabjerg. “What scares me also is the massive drop in the euro/dollar. It’s dropping one big figure a day. If it goes below $1.30, we’re going to visit $1.25 very soon.”

The euro dipped below $1.30 at one point in late morning European trade, though recently it was back above that level at $1.3021, a decline of 0.7%.

U.S. stocks closed moderately lower on Monday, with Black Friday weekend sales failing to inspire overall markets, though Amazon.com Inc. /quotes/comstock/15*!amzn/quotes/nls/amzn (AMZN 179.49, +2.29, +1.29%)  shares set a new high.

Blaabjerg said the fact that U.S. markets were unable to manage a positive close on Monday bears testament to the weight of Europe’s woes.

“The nervousness on markets is so strong that it tears apart everything else in terms of good news,” he said.

“We’re going to see a strong U.S. jobs report on Friday, but I’m also pretty convinced that as long as this goes on in Europe, that’s not going to affect markets much,” he said, adding that he’d “go long the S&P 500 and go short on the German DAX 30 index” right now.

Economic data on the calendar for Tuesday include Case-Shiller home prices for September and the Chicago PMI index on November business activity, at 9:00 a.m. and 9:45 a.m. Eastern time, respectively.

At 10 a.m. Eastern, the Conference Board will release November consumer-confidence data.

Shares of Merck /quotes/comstock/13*!mrk/quotes/nls/mrk (MRK 34.69, -0.10, -0.29%)  tumbled 8% in very thin pre-open trade after the company said it has appointed Kenneth C. Frazier to be chief executive officer and president, succeeding Richard T. Clark. Frazier will also serve as a member of the board.

Shares of Lowe’s Companies Inc. /quotes/comstock/13*!low/quotes/nls/low (LOW 22.36, +0.12, +0.54%)  could be in focus after the group affirmed its forecast for 2010 of earnings per share of $1.37 to $1.40, same-store sales growth of 1% to 2% and total sales growth of 3% to 4%.

On the deal front, Swiss power and automation group ABB Ltd. /quotes/comstock/13*!abb/quotes/nls/abb (ABB 19.57, -0.01, -0.05%)  said it will pay $4.2 billion, including $1.1 billion in debt, for electric-motor manufacturer Baldor Electric Co. /quotes/comstock/13*!bez/quotes/nls/bez (BEZ 45.11, -0.46, -1.01%)  in a deal agreed by both companies. Shares of Baldor Electric surged nearly 40% in premarket trading.

Shares of Google Inc. /quotes/comstock/15*!goog/quotes/nls/goog (GOOG 582.11, -7.89, -1.34%)  could be active after a report it’s near a deal to buy closely held online discounter Groupon Inc. for around $6 billion. Citing people close the situation, the New York Times said the deal could be hammered out as soon as this week, though unidentified people said talks were still at an early stage.

European stock markets traded mostly lower on debt worries, while fears of further monetary-policy tightening in China pushed the Shanghai Composite index to its lowest close in seven weeks.

December gold futures rose $5.30 to $1,371.30 an ounce.

Barbara Kollmeyer is an editor for MarketWatch in Madrid.

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