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Wall Street set for weak start as rate cloud lingers

business Updated: Jun 13, 2007 17:17 IST
Amanda Cooper
Amanda Cooper
Reuters
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US index futures fell on Wednesday, suggesting the stock market will extend its two-week slide as a sharp rise in government bond yields heightens investor concern about higher corporate borrowing costs.

A report on May retail sales later in the day along with the release of the Federal Reserve's monthly report on the economy will give the market some more insight into how the US consumer fared last month.

September Dow Jones futures fell 0.2 per cent, while S&P futures fell 0.2 per cent, as did Nasdaq 100 futures.

The rise in benchmark 10-year US Treasury yields to fresh five-year highs above 5.30 per cent on Tuesday stripped 1 per cent off the Standard & Poor's 500 which is on track for a second straight week of declines, its worst run in a year.

"Today's focus for the US will be retail sales expected ahead of the market open, with the market consensus of a 0.6 per cent reading here," said Scott Scrase, a trader at CMC Markets in a note.

"Later on in the day sees the release of the Fed's Beige Book which should attract some interest for the general business outlook over the next few months and what corresponding affect that could have on interest rates."

On Tuesday, the Dow Jones industrial average fell 129.95 points, or 0.97 per cent, to end at 13,295.01. The S&P dropped 16.12 points, or 1.07 per cent, to finish at 1,493.00. The Nasdaq Composite Index slid 22.38 points, or 0.87 per cent, to close at 2,549.77.

A Reuters poll shows retail sales are expected to have risen by 0.6 per cent last month, compared with a fall of 0.2 per cent in April, while sales excluding automobiles are forecast to have risen by 0.7 per cent after an unchanged reading in April.

Among some of the major stocks on the move in Europe was Canadian aluminium producer Alcan, which fell 0.8 per cent in Frankfurt to 60.50 euros, mirroring a 1 per cent fall in the aluminium price.

In merger news, Jones Apparel Group was nearing a deal to sell its upmarket Barney's New York department store chain for $950 million to a private equity firm owned by the Dubai government, according to the New York Post.

No major companies were expected to report earnings.