NEW YORK (TheStreet) -- U.S. stocks were pointing to a weaker open Wednesday as the markets grew increasingly fearful about a debt default in Italy.
Futures for the Dow Jones Industrial Average were tumbling by 213 points, or 215 points below fair value at 12,170. Futures for the S&P 500 were behind by 28 points, or 28 points below fair value, at 1276, and Nasdaq futures were losing 43 points, or 46 points below fair value at 2400.
U.S. futures tumbled as the markets feared for the future of Europe's third largest economy. Italy's borrowing costs headed towards untenable levels today even after a crucial budget reform measure was passed by the Italian parliament on Tuesday.
Italian prime minister Silvio Berlusconi's promise to step down failed to end the protracted period of political uncertainty in the country, and that, combined with the move by clearinghouse LCH.Clearnet to hike the initial margin required to trade Italian bonds mobilized a snowball effect that helped trigger soaring yields Wednesday.Italian 10-year yields surged by 65 basis points to breach the crucial 7% level at a crisis level of 7.42% and the five-year bonds were trading at 7.63%, indicating deep fears about a the possibility of an Italian default. Italy was scheduled to hold a five-year bond auction worth €6 billion euros on Monday, and now the markets await more details on whether the sale will be amended. There is little word yet on to what degree the European Central Bank will intervene in the Italian bond market and halt the price slide. London's FTSE was losing 2% and Germany's DAX was falling 2.4%. Japan's Nikkei Average ended 1.2% higher and Hong Kong's Hang Seng rose 1.7%. On Tuesday, stocks closed near session highs as investors saw Italian Prime Minister Silvio Berlusconi's plans to reportedly resign as a positive for Italy's future. Investors were taking Berlusconi's promise to resign as a sign that Italy may get back on track in resolving its debt problems. Italy will probably vote next week on austerity measures in a new budget bill. If Berlusconi does step down as he says once the budget law passes, investors will be looking for clarity on new leadership for Italy. The Commerce Department releases its wholesale inventories report at 10 a.m. EST. A survey of economists by Thomson Reuters suggests that inventories rose by 0.5% in September, compared with the rise of 0.4% the previous month. Federal Reserve Chairman Ben Bernanke is scheduled to speak at a small business conference at 9:30 a.m. In corporate news, General Motors (GM) said its third-quarter profit fell 15% to $1.7 billion, or $1.03 a share, on revenue of $36.7 billion. While the results beat the 96-cent average estimate of analysts surveyed by Thomson Reuters, the company said weakness in the European market may cause it to miss profit targets this year. Shares were losing 6.6% to $23.40 in premarket trading. Dow component Cisco Systems (CSCO) reports fiscal first-quarter results after the closing bell Wednesday, and the average estimate of analysts polled by Thomson Reuters is for earnings of 39 cents a share on revenue of $11.03 billion. The stock is down roughly 10% so far in 2011 vs. a gain of more than 5% for the Dow overall. Shares were falling 1.6% to $18.01 in premarket trading. Activision Blizzard (ATVI) said third-quarter profit nearly tripled as revenue rose 1% to $754 million. Activision earned $148 million, or 13 cents a share, in the quarter, up from $51 million, or 4 cents, a year earlier. Adjusted earnings were 7 cents a share, 2 cents above analysts' expectations. The company also raised its outlook for the year. The earnings were released the same day Activision began selling Call of Duty: Modern Warfare 3, the latest game in the Call of Duty franchise. Shares were losing 4.9% to $13.25. Adobe Systems (ADBE) said it plans to eliminate 750 jobs, or roughly 8% of its work force, as part of a restructuring. Adobe backed its outlook for fiscal fourth-quarter adjusted earnings, saying it still sees a non-GAAP profit of 57 cents to 64 cents a share on revenue of between $1.075 billion and $1.125 billion. Shares were tumbling 9.4% to $27.55. Macy's (M), the retailer, is expected by analysts to post third-quarter earnings of 16 cents a share on revenue of $5.88 billion. Shares were falling 4.1% to $30.85. The December crude oil contract was falling $1.20 to trade at $95.60 a barrel. Elsewhere in commodity markets, gold for December delivery was behind by $2.60 to trade at $1796.60 an ounce. The benchmark 10-year Treasury was up 29/32, diluting the yield to 1.983%. The dollar gained against a basket of currencies, with the dollar index up 1.3%. -- Written by Andrea Tse in New York.
>To contact the writer of this article, click here: Andrea Tse.
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