Indications: U.S. futures strain for gains as China hikes rates

By Polya Lesova, MarketWatch

LONDON (MarketWatch) â€" U.S. stock futures traded marginally higher Tuesday after China’s central bank lifted interest rates in an effort to stem rising inflation.

Futures on the Dow Jones Industrial Average /quotes/comstock/21b!f:dj\h11 (DJH11 12,121, +13.00, +0.11%)  gained 13 points to 12,121 and S&P 500 futures /quotes/comstock/21m!f:sp\h11 (SPH11 1,316, +0.40, +0.03%)  rose 1.50 points to 1,317.30.

Nasdaq 100 futures /quotes/comstock/21m!f:nd\h11 (NDH11 2,346, +0.50, +0.02%)  advanced 2.50 points to 2,347.50.

Futures pared their gains, however, after the People’s Bank of China said, according to reports, it would raise benchmark lending and deposit rates by 25 basis points.

It will be difficult ”to muster much bullish sentiment today, as it shows that the Chinese authorities are committed to keeping a lid on inflation,” said Kathleen Brooks, research director for U.K. and Europe, the Middle East and Africa, at Forex.com.

“However, they are embarking on a very slow, steady hiking cycle and it’s worth pointing out that real interest rates in China are still negative,” she said in a note.

Dow ends higher for sixth day

The factors behind Monday's stock rally.

The Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:STOXX600 287.50, -1.24, -0.43%)  fell 0.4% in intraday trading.

The Dow industrials /quotes/comstock/10w!i:dji/delayed (DJIA 12,162, +69.48, +0.57%)  rose 0.6% Monday to close at its highest level since June 2008.

The U.S. economic calendar is relatively thin on Tuesday. The NFIB index of small business optimism for January will be released at 7:30 a.m. Eastern time.

On the corporate front, Coventry Health Care Inc. /quotes/comstock/13*!cvh/quotes/nls/cvh (CVH 31.34, +0.02, +0.06%)  said fourth-quarter net profit rose 38% to $150.3 million, or $1.01 a share.

Entergy Corp. /quotes/comstock/13*!etr/quotes/nls/etr (ETR 73.91, +0.66, +0.90%)  is also scheduled to report financial results.

Shares of ArcelorMittal SA /quotes/comstock/13*!mt/quotes/nls/mt (MT 36.78, +0.64, +1.77%)  rose nearly 5% in premarket trading. The steel maker reported a fourth-quarter net loss but said a gradual underlying demand recovery should extend into 2011.

Shares of UBS AG /quotes/comstock/13*!ubs/quotes/nls/ubs (UBS 18.39, -0.05, -0.27%)   /quotes/comstock/06p!ubsn (CH:UBSN 17.96, +0.46, +2.63%)  gained 1.9% in premarket trading after the Swiss investment bank said fourth-quarter net profit rose 7% and reported a second consecutive quarter of cash inflows from wealthy clients.

Shares of Teva Pharmaceutical Industries Ltd. /quotes/comstock/15*!teva/quotes/nls/teva (TEVA 54.98, +0.88, +1.63%)  fell more than 3% in premarket trading after it reported fourth-quarter earnings that were below market expectations.

In the currency markets, the euro gained 0.5% to $1.3651.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 77.91, -0.12, -0.15%) , which tracks the performance of the greenback against a basket of other major currencies, sank 0.4% to 77.749.

In commodities, crude-oil futures dropped $1.40 to $86.08 a barrel in electronic trading on Globex, while gold futures gained $5.70 to $1,353.90 an ounce.

Polya Lesova is chief of MarketWatch’s London bureau.

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