Stock Futures Dip After Economic Data

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A weaker-than-expected report on U.S. economic expansion pushed stock-index futures modestly into the red on Tuesday morning.

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Today's Markets

As of 8:35 a.m. ET, Dow Jones Industrial Average futures fell 37 point to 11,487, S&P 500 futures slipped 2.8 points to 1,188 and Nasdaq 100 futures dipped 12.3 points to 2,201.

A second reading on U.S. gross domestic product showed the economy expanded at an annualized rate of 2% in the third quarter of 2011, weaker than the 2.5% initially projected. Economists were looking for a reading of 2.5%. Still the pace of expansion was dramatically quicker than the 1.3% notched in the second quarter.

The business investment and housing investment components took the biggest downward revision.  However, one positive note is that so-called net exports, that is exports less imports, received a significant upward revision.

Wall Street was slammed on Monday as it became clear the congressional Super Committee tasked with drafting $1.2 trillion in spending cuts failed to reach an agreement.  The selloff was ferocious enough to knock the Dow, S&P 500 and Nasdaq back to the lowest level since October.  All three market averages are now in the red for 2011 as well.

Despite the 12-member committee's inability to craft the legislation, an immediate downgrade of the country's debt rating appears unlikely.  Standard & Poor's and Moody's both re-affirmed their rating on U.S. debt, while Fitch said its reviewing its outlook.  Fitch presently has the most upbeat outlook.

"There is something of a collective sigh of relief following last night's announcement that the U.S. credit rating won't be downgraded," David Jones, chief market strategist at London-based IG Index wrote in an e-mail.

The lack of action by the debt panel will, however, spark a series of potentially painful spending cuts beginning in 2013.  Analysts say the impact on the economy this year and next year will be fairly muted and lawmakers have plenty of time to come up with a solution: "The outcome of the super committee should have very little direct effect on fiscal policies in 2012," Alec Phillips an economist at Goldman Sachs wrote in a note to clients Monday night.

Still, Phillips notes the situation surrounding emergency unemployment benefits and a payroll tax holiday, both of which expire at the end of the year, has become murkier as a result of the deep divides. Both measures directly affect consumers, and therefore can have an impact on the economy going forward, and on equities.

Market participants were still paying close attention to developments from Europe.  Yields on euro zone sovereign debt remain highly elevated in countries such as Italy, in the latest sign the continent's debt crisis is beginning to affect sizeable world economies.

A top German official reaffirmed on Tuesday that Europe's biggest economy believes the path the euro zone is taking to stave off the debt debacle is appropriate, dimming hopes for joint euro-zone bonds or increased actions by the European Central Bank.

The euro rose 0.39% to $1.355, while European blue chips gained 0.54%. The dollar fell 0.38% against a basket of six world currencies.

Energy markets jumped tracking a weaker dollar and rising equities.  The benchmark crude oil contract traded in New York rose $1.43, or 1.5%, to $98.33 a barrel.  Wholesale RBOB gasoline climbed 4 cents, or 1.8%, to $2.53 a gallon.

In metals, gold gained $14.70, or 0.88%, to $1,693 a troy ounce.  U.S. Treasury yields bounced back after falling in the prior session.  The benchmark 10-year note yields 1.972% from 1.950%.

Foreign Markets

European blue chips rose 0.54%, the English FTSE 100 gained 0.67% to 5,258 and the German DAX climbed 0.7% to 5,646.

In Asia, the Japanese Nikkei 225 fell 0.4% to 8,315 and the Chinese Hang Seng ticked higher by 0.14% to 18,252.

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