U.S. stock futures turned lower Monday after a four-week rally, with a downgrade of Cisco Systems and the apparent collapse of the Sun Microsystems deal clouding sentiment. After early gains, stock futures turned sour. S&P 500 futures fell 6.7 points to 833.90 and Nasdaq 100 futures dropped 9.25 points to 1,307.00. Dow industrial futures fell 35 points. Over the last four weeks, the Dow Jones Industrial Average has gained 20.35%, the best four-week performance since 1933. On Friday, stocks advanced as traders looked past a report showing 663,000 jobs lost in the month of March. The VIX volatility index closed below 40 for the first time since January, a signal that investors have been more willing to take on risky trades. Ian Scott, head of global and European strategy at Nomura International, said cyclical stocks across the world now trade on a 26% price-to-earnings premium to other sectors. "Back in the early 1990s, the cyclicals ran for another 14 months after reaching a similar P/E premium to the one they enjoy today; given the velocity of this current cycle, we doubt the rotation will last as long this time, but it is still probably too early to get defensive," said Scott in a note to clients. Other asset classes also showed a move toward increased risk taking. Gold futures slumped $15 an ounce, and the dollar climbed 0.5% vs. the Japanese yen. Yields on 10-year Treasury bonds rose 2 basis point to 2.91%. Bond yields move in the opposite direction to prices. But oil futures also turned lower as the stock market open neared, with the lead contract shedding 81 cents a barrel. On Monday's docket, Fed Governor Kevin Warsh is due to speak on the financial market and economic developments. Over the weekend, Treasury Secretary Timothy Geithner said bank executives could be ousted if they require further "exceptional assistance." Sun Microsystems tumbled 21% in pre-open trade as The Wall Street Journal reported that takeover talks with International Business Machines are on the verge of collapse. IBM slipped 1%. Cisco Systems slipped 2% as Goldman Sachs cut the networking giant to neutral from conviction buy. HSBC Holdings climbed in Asian and European action after reporting that investors took on virtually all of the 12.5 billion pounds in discounted shares that were on the table. Stocks generally were stronger in Asia. Looking past North Korea's test-firing of a rocket, with Japan's Nikkei 225 ending up 1.2%, its highest level since Jan. 8. The Hang Seng pushed above the 15,000 level. But stocks in Europe slipped, with the FTSE 100 slipping 0.3% in London and the German DAX 30 down 0.1%.

Source