Wall Street headed for a sharply lower start Monday, set to follow a
global equity rout as fears of a full-fledged Spanish bailout and a
Greek exit from the euro returned to the spotlight.
Futures on the Dow Jones Industrial Average fell 154 points to 12619.
S&P 500 index futures dropped 16.3 points to 1341.90, while Nasdaq-100
futures lost 34.75 points to 2578.50.
"We start yet another week with a very fragile backdrop--that of
Spanish debt trading at the widest euro-era levels and politicians and
policy makers doing little to stem the crisis," wrote strategists at
Lloyds TSB, in a note to clients.
Spanish government bond yields picked up where they left off Friday,
soaring to another round of euro-era highs. The yield on the 10-year
benchmark traded at 7.45%, a rise of nearly a quarter of a basis
point, and well above the 7% threshold widely viewed as potentially
unsustainable in terms of long-term government borrowing costs. The
two-year yield jumped nearly 0.90 percentage point.
Strategists tied the Spanish bond carnage to a combination of factors,
including a decision Friday by the regional government in Valencia to
seek state aid, uncertainty over whether Spain's government will be
able to take the cost of the 100 billion euro ($123 billion) bank
bailout from its books, and the government's cut in its own economic
projections.
Add in weekend news reports that the International Monetary Fund is
prepared to cut off further aid for Greece, and global equity markets
opened the week with a tumble.
Asian stocks fell sharply and European equities were under heavy
pressure. The Stoxx 600 Europe index fell 2%. Spain's IBEX 35 index
dropped more than 5% after losing nearly 6% on Friday.
The euro temporarily dropped below the $1.21 level versus the dollar
and remained 0.4% lower at $1.2107. The dollar index (DXY), which
measures the U.S. unit against a basket of six major rivals, rose 0.4%
to 83.790.
Meanwhile, corporate earnings data will continue to roll in this week,
including the latest results from Apple Inc. (AAPL), Ford Motor Co.
(F), Facebook Inc. (FB) and McDonald's Corp. (MCD).
McDonald's is expected to report earnings ahead of Monday's opening bell.
Nymex crude-oil futures fell $2.93 to $88.90 a barrel in electronic
trade. Gold futures lost $11.40 an ounce to trade at $1,571.40.
Write to William L. Watts at AskNewswires@dowjones.com
HOT STOCKS TO WATCH
Among the companies with shares expected to actively trade in Monday's
session are Mission West Properties, Inc. (MSW) and Talbots Inc.
(TLB).
Mission West Properties, one of the largest office landlords in
California's Silicon Valley, is in talks to sell itself to Divco West,
a San Francisco real-estate investment firm, and private equity firm
TPG, according to people who have been briefed on the deal. Shares
jumped 6.7% to $9.35 after hours.
Talbots said Pension Benefit Guaranty Corp. won't take action related
to the retailer's acquisition by private-equity firm Sycamore
Partners, paving the way for the deal to close. Shares were up 2.3% to
$2.69 after hours.
Watch List:
AT&T Inc. (T) said it has reached agreements "in concept" with the
Communications Workers of America in wireline contract negotiations
for about 18,700 employees.
Moody's Investors Service downgraded Booz Allen Hamilton (BAH) credit
rating one notch further into junk territory, pointing to the
consulting firm's shift to an aggressive financial policy after it
proposed paying a special $1 billion dividend last week.
Standard & Poor's Ratings Services boosted its investment-grade rating
on J.B. Hunt Transport Services Inc. (JBHT), saying the trucking
company's earnings and free cash flow generation have continued to
improve.
Nasdaq OMX Group Inc. (NDAQ) announced plans Friday to increase
compensation to brokers that lost money trading in Facebook Inc.'s
(FB) problematic stock-market debut to $62 million.
Star Bulk Carriers Corp. (SBLK) said one of its ships has been docked
in South Korea for an estimated four months of repairs after its
engine failed.
Write to Nathalie Tadena at nathalie.tadena@dowjones.com
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(END) Dow Jones Newswires
July 23, 2012 07:15 ET (11:15 GMT)
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