MarketWatch.com - Pre-Market Indications

Tuesday, February 22, 2011

Indications: U.S. stock futures dip on Mideast violence

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By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) â€" U.S. stock futures fell Tuesday, with Wall Street returning to action on a day of unrest for global markets as violence increased in the major oil-producing state of Libya, with the session also marked by corporate results from Wal-Mart Stores and Home Depot.

Futures pared earlier losses, but they were still sharply lower. Futures for the Dow Jones Industrial Average fell 98 points, or 0.8%, to 12,277, while those for the S&P 500 index fell 17.3 points, or 1.3%, to 1,3252.20.

Gadhafi's rule appears in jeopardy

Libyan leader Col. Moammar Gadhafi's grip on power appears in increasing doubt.

Futures for the Nasdaq 100 fell 37 points, or 1.5%, to 2,358.

“We’ve been in an economic environment where everything has been based on the principle of low interest rates forever ... but when you have something like what’s going on in North Africa [and the Mideast], you are put immediately back into the frame of volatility, which will be increasing,” said Copenhagen-based Steen Jakobsen, chief investment officer for Limus Capital.

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“Let’s say [Libyan leader Col. Moammar] Gadhafi leaves tonight. Is that good or bad for oil prices?” he said.

Gadhafi has violently crushed protests in his country and reports said that the death toll is now up to 300 and that Gadhafi has hired mercenaries who have opened fire on civilians. Many from his own regime have also reportedly resigned, as global protests have intensified.

Oil and gold prices surged overnight and into European trading hours. Read more on oil rising as Gadhafi’s hold on Libya in doubt.

Shares of Italian oil giant Eni SpA /quotes/comstock/13*!e/quotes/nls/e (E 50.30, +0.19, +0.38%) , the country’s largest energy company based on market value, fell over 7% in preopen trading.

“Maybe the U.S. will see opportunities technically, but the fact of the matter is â€" underlying what goes on in the stock market â€" it’s now an increased uncertainty of path. It should get people to get more defensive going foward and expect higher volatility,” said Jakobsen.

U.S. markets were closed on Monday for the Presidents Day holiday.

The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 12,391, +73.11, +0.59%)  marked its highest close since June 5, 2008, on Friday, with multiyear closing highs for the Nasdaq 100 index /quotes/comstock/10y!i:comp (COMP 2,834, +2.37, +0.08%)  and S&P 500 /quotes/comstock/21z!i1:in\x (SPX 1,343, +2.58, +0.19%)  as well.

Economic data due for release include Case-Shiller home prices for February, expected at 9 a.m. Eastern time, and the Conference Board consumer-confidence survey for February, due at 10 a.m. Eastern.

As for companies in focus, Wal-Mart Stores Inc. /quotes/comstock/13*!wmt/quotes/nls/wmt (WMT 55.38, +0.63, +1.15%)  reported fourth-quarter profit rose to $6.06 billion, or $1.70 a share, topping analysts’ estimates. Sales fell short of forecasts, however, at $115.6 billion. The company also forecast first-quarter profit of 91 cents to 96 cents a share, and $4.35 to $4.50 for the full year.

Fellow blue chip Home Depot Inc. /quotes/comstock/13*!hd/quotes/nls/hd (HD 38.48, +0.30, +0.79%)  earned 36 cents a share in the fourth quarter, compared to 20 cents a share in the year-ago period.

Also among retailers, Office Depot Inc. /quotes/comstock/13*!odp/quotes/nls/odp (ODP 5.47, -0.15, -2.67%)  narrowed its fourth-quarter loss to $48.6 million, or 21 cents a share, on sales that fell 3% to $2.96 billion. The group said it would have earned $24 million, or 9 cents a share, excluding one-time charges. Earnings were also boosted by tax benefits, the company said.

Shares of Chesapeake Energy Corp. /quotes/comstock/13*!chk/quotes/nls/chk (CHK 30.43, -0.06, -0.20%)  rose 9.4% in pre-open trading, rallying after it announced late Monday that it will sell its shale assets to BHP Billiton Ltd. /quotes/comstock/22x!e:bhp (AU:BHP 46.58, +0.73, +1.59%)   /quotes/comstock/13*!bhp/quotes/nls/bhp (BHP 92.39, -1.54, -1.64%)  for $4.75 billion in cash.

Shares of Royal Caribbean Cruises Ltd. /quotes/comstock/13*!rcl/quotes/nls/rcl (RCL 47.16, -0.03, -0.06%)  fell 6.7%, with heavy fog in Galveston, Texas, affecting ship traffic in the area in recent days.

In mergers and acquisition news, independent petroleum refiner and marketer Holly Corp. /quotes/comstock/13*!hoc/quotes/nls/hoc (HOC 56.11, -4.41, -7.29%)  and refinery operator Frontier Oil Corp. /quotes/comstock/13*!fto/quotes/nls/fto (FTO 28.12, -0.82, -2.83%)  announced a merger of equals in an all-stock deal that will create a company with a combined value of $7 billion.

Dynegy Inc. /quotes/comstock/13*!dyn/quotes/nls/dyn (DYN 6.01, -0.04, -0.66%)  said Chief Executive Officer Bruce Williamson will resign and named David Biegler as interim CEO.

In Europe, markets tumbled with airlines and banks leading declines amid worries over the increasing Libyan violence and with it, rising oil prices. See Europe Markets.

In Asia, markets also suffered sharp losses, with a major earthquake in New Zealand and a move by Moody’s Investors Service to cut the outlook on Japan’s Aa2 rating to negative from stable in focus. See Asia Markets.

In commodities, crude oil for April delivery rose $6.32 to $96.03 a barrel, as oil producers moved to cut back on Libya output. Gold for April delivery also rose, gaining $9.50 to stand at $1,398.10 an ounce

The dollar pared some earlier gains. The dollar index /quotes/comstock/11j!i:dxy0 (DXY 77.74, +0.05, +0.06%) , which measures the U.S. unit against a basket of six major currencies, rose to 77.769 from 77.379 late Monday in Europe.

Barbara Kollmeyer is an editor for MarketWatch in Madrid.

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