EU Anxiety, Intel Cut Send Futures Sliding


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Stock-index futures followed European markets into the red as market participants grew wary that an agreement between EU countries to tighten fiscal ties struck last week wouldn't be enough to stem the worsening debt crisis.

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Today's Markets

As of 9:20 a.m. ET, Dow Jones Industrial Average futures slid 129 points to 12,014, S&P 500 futures dipped 15.3 points to 1,238 and Nasdaq 100 futures fell 27.5 points to 2,291.

Headlines on the eurozone's debt crisis captivated the markets last week, and appear poised to do the same on Monday. Every European Union country besides Great Britain agreed on Friday to a fiscal union that would help keep public debt in check, and help to avoid a repeat of the debt crisis that has stricken the bloc.

The hope was that if European leaders made such an agreement, the politically-independent European Central Bank might step in to buy eurozone sovereign debt, knocking borrowing costs down from painful levels. Such a move hasn't been explicitly signaled of yet, and debt yields remain elevated.

"The outlook for the euro is hardly any better than it was on Friday," Chris Beauchamp, a market analyst at London-based IG Index wrote in an e-mail. Beauchamp notes there is considerable risk that investors could begin fleeing from beleaguered eurozone debt once again, which would send yields climbing.

The benchmark 10-year Italian bond yield climbed 14 basis points above the closely-watched 7% mark. The premium investors demand to hold Italian debt as opposed to safe-haven German bunds also topped 5% in a sign of the worries.

However, in what was seen as a relatively positive sign, the country sold 7 billion euro in one-year bonds at a yield of 5.92%, down from a record 6.087% in November.

Meanwhile, Moody's Investor Service said Monday it may downgrade certain EU countries in the coming month as the debt crisis continues posing a risk to many countries. The move follows Standard & Poor's, which put 15 eurozone countries on watch for a downgrade last week.

The euro tumbled 1.1% to $1.3237, while European blue chips slid 1.5%. The U.S. dollar jumped 0.67% against a basket of six world currencies.

Adding to the gloomy sentiment on the day, Intel (NASDAQ:INTC) cut its fourth-quarter revenue guidance as a result of hard drive shortages. The chip maker said it now expects sales of $13.7 billion from a prior estimate of $14.7 billion. Intel also cuts its gross margin expectations, a key profitability metric, to 64.5% from 65%.

The main economic report on the docket comes on Monday afternoon. The U.S. budget deficit is forecast to have fallen to $139.5 billion in November from $150.4 billion in the same month last year.

Energy markets were in the red, tracking equities and a stronger dollar. The benchmark crude oil contract traded in New York fell $1.02, or 1%, to $98.39 a barrel. Wholesale RBOB gasoline slipped 0.1% to $2.593 a gallon.

In metals, gold dropped $34.00, or 2%, to $1,683 a troy ounce. Investors moved into U.S. government debt, pushing yields lower. The benchmark 10-year Treasury yields 2.038% from 2.07%.

Foreign Markets

European blue chips slid 1.5%, the English FTSE 100 fell 0.33% to 5,511 and the German DAX dipped 1.5% to 5,898.

In Asia, the Japanese Nikkei 225 jumped 1.4% to 8,654 and the Chinese Hang Seng slid 1% to 2,478.

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