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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