Stock futures fall on China policy concerns

[February 04, 2010]  NEW YORK (AP) -- Stock futures fell Wednesday, pointing to a lower opening, following new signs China might tighten its monetary policy.

Another round of U.S. bank earnings and reports on housing starts and inflation at the wholesale level also have investors on edge heading into trading.

Overseas markets were lower after a newspaper report said some Chinese banks were ordered to stop lending for the rest of January after exceeding credit limits. The report came a day after a speech by Premier Wen Jiabao was seen as a sign the country might slow the flow of easy credit, which could undermine a global economic recovery.

In the U.S., both Bank of America Corp. and Wells Fargo & Co. are set to report fourth-quarter results that should provide further insight into whether consumers are still struggling to repay their debt.

Both JPMorgan Chase & Co. and Citigroup Inc. in recent days have said they are still very cautious about when the economy recovery and customers will be able to start repaying loans again.

With unemployment still at 10 percent and consumers unable to pay mortgages and other loans, it would be difficult for spending to rise sharply and provided a necessary boost to a fragile economic recovery.

Ahead of the opening bell, Dow Jones industrial average futures fell 42, or 0.4 percent, to 10,628. Standard & Poor's 500 index futures fell 5.20, or 0.5 percent, to 1,140.50, while Nasdaq 100 index futures fell 8.75, or 0.5 percent, to 1,881.00.

Investors are awaiting two economic reports for further signs of economic recovery. A new housing report from the Commerce Department is expected to provide mixed signals about a recovery.

The report is expected to show new home construction rose to a seasonally adjusted annual rate of 580,000 in December, a 1 percent increase from a month earlier, according to economists polled by Thomson Reuters. However, the Commerce Department report is also expected to show applications for building permits, considered a good barometer of future activity, fell 1.5 percent to an annual rate of 580,000.

The report is due out at 8:30 a.m. EST.

A separate report due out at the same time from the Labor Department is expected to show inflation at the wholesale level -- as measured by the Producer Price Index -- was unchanged in December, after a 1.8 percent increase in November.

Core inflation, which excludes volatile energy and food prices, likely rose 0.1 percent last month.

The tame inflation report would again show inflation is not a problem and provide the Federal Reserve the room to keep interest rates at record low levels to try and help boost the economy.

Stocks rallied Tuesday as traders placed bets that the outcome of a special election in Massachusetts for an open Senate seat would make it harder for President Barack Obama to make changes to health care. That pushed health care stocks higher because it eased concerns new regulatory proposals that could eat into profits would not pass.

Scott Brown's victory in the election gives Republicans the 41 votes necessary to block Democratic proposals, including the health care bill.

The Dow rose 116 points to close at a 15-month high.

Meanwhile bond prices rose Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.68 percent from 3.70 percent late Tuesday.

The dollar rose against other major currencies, while gold prices fell.

Overseas, China's main Shanghai composite index dropped 2.9 percent, while Japan's Nikkei stock average fell 0.3 percent. Britain's FTSE 100 declined 0.4 percent, Germany's DAX index dropped 0.2 percent, and France's CAC-40 fell 0.2 percent.

[Associated Press; By STEPHEN BERNARD]

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