Wall Street Poised to Fall from Multi-Year Highs
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Stock-index futures signaled Wall Street may recede from multi-year highs on Monday as traders grew more cautious over rising crude oil prices and continued uncertainty over the European debt crisis.
Today's Markets
As of 8:10 a.m. ET, Dow Jones Industrial Average futures fell 46 points to 12915, S&P 500 futures dipped 6 points to 1257 and Nasdaq 100 futures dropped 10 points to 2592.
The broad S&P 500 capped the quiet, holiday-shortened trading week at the highest level since 2008, while the technology-heavy Nasdaq ended at the highest value since 2000. Meanwhile, the Dow is sitting right near its best level in nearly four years.
Market participants struck a considerably more cautious tone on Monday, however. European shares took a particularly strong hit, with the Euro Stoxx 50 selling off by 1%, while Asian bourses were down by a slimmer margin. Instead of pointing to one single event as the catalyst for the downward pressure, traders said there was a general weakening of sentiment, coupled with fatigue over themes that have driven the market in recent weeks.
"A lot of bank traders are sitting on their hands," Louise Cooper, a senior financial analyst based in London at BGC Partners said in an interview with FOX Business, adding that may traders are "exhausted" by the sheer number of headlines regarding Europe's debt crisis.
On that front, Germany's parliament is set to vote on a $172 billion bailout package from the European Union that Greece needs to avoid a default on Monday. While the leadership of the eurozone has agreed to the deal, parliaments representing the 17-member currency bloc now need to agree to it. Analysts generally expect passage, but many of the legislative bodies may face resistance from factions not in support of the bailout.
The European Central Bank is also set to allow banks to apply for a second round of three-year loans at an interest rate of 1% on Tuesday. The first round was seen by many analysts as critical in helping stave off a pan-European credit crunch that could have taken a big toll on financial markets.
The results are expected to be published on Wednesday, and market participants will be watching very closely to see how much money banks borrow. A number too high could mean that banks are in worse shape than expected, but one too low, on the contrary, could indicate banks are not taking advantage of the low rates. The hope, according to media reports, is that banks will lend the money to consumers and businesses, plus use the low-rate loans to invest in sovereign debt that will pay a considerably higher rate. In turn, the investment in sovereign debt may help to push yields lower, lessening countries' debt burdens.
The euro fell 0.35% to $1.3401, while the U.S. dollar rose 0.21% against a basket of six world currencies tracked by the dollar index.
Energy prices have also been a key worry for traders on Wall Street. U.S. crude oil closed out the week last week at its highest value since May, while New York Harbor wholesale gasoline ended at its highest level since April. Oil prices are now up close to 17% on the year as tension has mounted between Iran and Western countries.
Futures were pressured on the day by a stronger dollar. Generally, dollar-traded commodities trade inversely to the greenback because as it rises, the underlying material gets more expensive.
The benchmark crude contract fell $1.06, or 0.96%, to $108.73 a barrel. Wholesale gasoline slid 0.59% to $3.134 a gallon. In metals, gold fell $6.50, or 0.37%, to $1,770 a troy ounce.
The U.S. economic calendar on the week is fairly heavy, with several key reports on tap. On Monday, traders will get fresh data on the still-weak real estate market. Pending home sales may have risen 1% in January from the month prior, according to economists' forecasts.
U.S. Treasury yields fell as traders bid up the safe-haven asset. The benchmark 10-year note yields 1.946% from 1.979%.
Foreign Markets
European blue chips fell 1%, the English FTSE 100 dipped 0.87% to 5,883 and the German DAX dropped 1.1% to 6,789.
In Asia, the Japanese Nikkei 225 slipped 0.14% to 9,634 and the Chinese Hang Seng slid 0.88% to 21,218.