A string of earnings come in from U.S. retailers, including Wal-Mart
By Polya Lesova and Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stock futures dropped Tuesday, as worries about a possible Chinese interest-rate hike had investors shrugging off positive results from Wal-Mart Stores Inc., the world’s largest retailer.
“The normal way you react to inflation is to raise rates, and since China is the one country growing robustly outside of India, we look at China as a consumer of goods, a source for exports — so there’s the ripple effect with trying to deliberately slow the economy. That’s the fear,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
Futures on the Dow Jones Industrial Average (DJZ10 11,128, -45.00, -0.40%) slipped 55 points to 11,118, and S&P 500 futures (SPZ10 1,190, -5.50, -0.46%) fell 5.4 points to 1,190.
The blue-chip Dow index (DJIA 11,202, +9.39, +0.08%) ended 0.1% higher Monday, erasing most of its intraday gains, while the Nasdaq (COMP 2,514, -4.39, -0.17%) and S&P 500 (SPX 1,198, -1.46, -0.12%) finished slightly lower.
Asian stocks dropped sharply, weighed by China’s Shanghai Composite index, which slumped 4%, as escalating worries over the prospect of higher interest rates sparked a selloff.
Meanwhile, the Bank of Korea raised its base rate by a quarter-point to 2.50% in an effort to stem inflationary pressures.
On the U.S. corporate front, retailers will be in focus on Tuesday.
Retailing giant Wal-Mart Stores Inc. (WMT 54.41, +0.46, +0.85%) reported a 9% rise in third-quarter profit and hiked its full-year earnings forecast. Read more about Wal-Mart’s results.
“Major retailers are starting to believe there is more foot traffic and people are shopping. It’s not like there is going to be some major surge in sales, but there is better activity going on,” said Pado.
Home Depot Inc. (HD 31.59, +0.20, +0.64%) , the No. 1 U.S. home-improvement retailer, said its third-quarter net income climbed a stronger-than-expected 21%. Read about Home Depot’s results.
Technology giant Apple Inc. (AAPL 306.57, -0.47, -0.15%) will also be in the spotlight after The Wall Street Journal reported that the company will soon be selling songs from the Beatles catalog through the iTunes Store. On its Web site, Apple told visitors that iTunes will make an exciting announcement “that you’ll never forget.”
The economic calendar is also busy Tuesday.
Data on producer prices for October will be released at 8:30 a.m. Eastern time, to be followed by a report on October industrial production at 9:15 a.m. Eastern. The NAHB housing market index is due at 10 a.m. Eastern.
Spotlight on Ireland
European equity markets also posted losses, as Ireland continued to resist pressure to accept a bailout ahead of a meeting of euro-zone finance ministers in Brussels. Read more on Ireland’s debt crisis.
“This is no time for pride or protection of sovereignty,” said David Buik, strategist at BGC Partners, in a note on Ireland. “Take the money offered by the EU [European Union] and the ECB [European Central Bank] provided the repayment of the debt can be rescheduled over a long period of time.”
Although the Irish government doesn’t need to tap the bond markets until next year, the main problem is the poor health of Irish banks, according to Buik.
“Failure to acquiesce will put huge pressure on Portugal, and who knows? Spain and Italy could well be dragged into the equation by the end of the year,” he said.
The Stoxx Europe 600 index (ST:STOXX600 268.97, -3.39, -1.25%) dropped 1.1% at last check.
In the currency markets, the dollar was little changed against its major rivals. The euro edged up to $1.3613.
Commodity prices came under selling pressure.
Gold futures dropped $13.5 to $1,355 an ounce, while oil futures fell $1.13 to $83.73 a barrel.
