Futures Head Lower After Rally

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Stock-index futures were in the red as traders mulled a slew of corporate earnings, and kept a close eye on developments from Europe on the heels a strong rally in the prior session. 

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As of 9:20 a.m. ET, Dow Jones Industrial Average futures fell 16 points to 11,510, S&P 500 futures dipped 2.5 points to 1,220 and Nasdaq 100 futures slid 18.8 points to 2,345. 

It has been yet another turbulent week for Wall Street: the Dow plummeted more than 240 points on Monday, just to rally 180 points the following the day.  The blue chips are standing right at the breakeven point for the year. 

Headlines regarding Europe's sovereign debt and financial crises have flung the markets higher and lower for months, and have had a particularly powerful impact this week.  A report from the Guardian suggesting France and Germany -- the region's biggest economic players -- have agreed to boost the European Financial Stability Facility to 2 trillion euros sent shares surging in the last hour of trading Tuesday.  However, Germany's finance minister quashed that report Wednesday, however, the markets had little reaction to that news. 

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Moody's also knocked down Spain's credit rating two notches, in the latest sign the debt crisis on that side of the Atlantic is escalating. 

European leaders are set to meet on October 23 following the Group of 20 summit where global financial chiefs pressured Europe to take steps to tackle its debt crisis. 

The euro zoomed 0.74% to $1.38, while European shares rallied more than 1%. 

Market participants have also had a deluge of earnings to parse through, with nearly half of all blue chips, and 20% of the S&P 500 reporting this week. 

Apple (AAPL) revealed earnings that fell short of analysts expectations -- a rare miss for the technology heavyweight.  The Cupertino, Calif. company saw weaker-than-expected demand for iPhones as customers awaited the next-generation iPhone 4S, which made record sales in its first weekend that was outside of the reporting period. Shares were down sharply on the news, potentially headed for the biggest loss since 2008, and are expected to weigh on the Nasdaq. 

Intel (INTC), in contrast, posted results that beat estimates, sending shares of the chipmaker solidly into the green. 

United Technologies (UTX) and Travelers (TRV) were the two Dow components to report before the opening bell.  United Technologies earned $1.47 for the third quarter, beating forecasts by three cents.  Meanwhile, Travelers' profits on continuing operations hit 79 cents, missing estimates of 87 cents.  The insurer struggled with heavy losses resulting from Hurricane Irene that slammed the U.S. East Coast. 

Inflation in on the Rise, Housing Starts Surge

On the economic front, the markets got fresh data on inflation and the new housing market.  Consumer prices rose 0.3% in September from August, which was inline with estimates.  Inflation at the headline level is up 3.9% from last year, which represents the swiftest gain since 2008. Excluding the food and energy component, prices were up 0.1%, a slower pace than the 0.2% economists forecast.  This report comes on the heels of a much bigger-than-expected gain in wholesale inflation, which was driven by higher energy prices.

Market participants say the increase in prices may spook more inflation-hawkish Fed officials that worry the central bank's highly expansionary monetary policy may stoke inflation. 

Housing starts rose 15% in September to a 658,000-unit rate, topping estimates of a 590,000-unit rate. Permits to build new homes, a more forward-looking read, fell 5% to a 594,000-unit rate, missing estimates of a 610,000-unit rate. A report released on Tuesday showed homebuilder sentiment jumped much more than expected in the beginning of October. 

The industry has been laden with a high supply of homes, tight lending conditions, and prices that have been very slow to recover. 

Commodities had a very volatile session on Tuesday, but were tamer Wednesday.  Light sweet crude was steady at $88.34 a barrel.  Wholesale RBOB gasoline fell 2 cents, or 0.65%, to $31.68 a gallon. 

Gold fell $3.40, or 0.21%, to $1,649 a troy ounce.  Yields on government debt are moving back up as investors have begun moving back into markets for riskier assets.  The benchmark 10-year Treasury note recently yielded 2.198% from 2.180%. 

Foreign Markets

The Euro Stoxx 50 jumped 1.4% to 2,339, the English FTSE 100 climbed 1.1% to 5,471 and the German DAX rallied 1.3% to 5,852. 

In Asia, the Japanese Nikkei 225 edged 0.35% higher to 8,773 and the Chinese Hang Seng soared 1.3% to 18,309. 

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