Global Markets Drop on Debt Concerns

Includes: DIA, EFA, IEV, QQQ, SPY
by: optionMONSTER

By Bryan McCormick

U.S. stock index futures are trading lower this morning on very light volume. Asian markets came under pressure overnight after Congress failed to agree on a move to raise the debt ceiling.

With the stalemate showing few signs of being resolved, investors shunned risk assets. China's markets fell sharply by as much as 3 percent.

In Europe banking stocks came under pressure as Moody's cut Greece's rating to "Ca", which is one notch above default. Moody's further noted that at this stage a default was all but inevitable for Greece. Losses in the broader markets were relatively limited, with the exception of Italy.

The Swiss franc hit a new lifetime high against the dollar, but the U.S. Dollar Index was down only fractionally given the relatively low weight of the Swiss currency. The Swedish krona and U.K. pound both slipped. The rest of the basket is relatively flat, with the yen up a third of a percent against the greenback.

The size of the move against other currency pairs suggests investors and traders are allocating away from "riskier" currencies, which at this point appear to be both the euro and the dollar.

Despite the lower dollar, commodities are under pressure in early trading. Energy, agriculture, and industrial metals are all lower, though livestock is showing strength.

The standout as far as asset classes are concerned is precious metals. Gold hit a fresh nominal high this morning, and silver jumped above the $40 mark.

In stock-specific news, Dow Chemical announced a joint venture with Saudi Arabia worth $20 billion that involves two manufacturing units. Construction will begin on a complex in Jubail Industrial City.

Baker Hughes (NYSE:BHI) exceeded revenue forcasts, but earnings came in below estimates on an unadjusted basis. After excluding doubtful account and reserves for inventory and assets in Libya, the company beat consensus by $0.03 per share.

Kimberly-Clark (NYSE:KMB) appeared to beat adjusted earnings expectations by $0.03 and reaffirmed its earnings targets for fiscal 2011, but its shares are trading lower in the pre-market.

E*Trade (NASDAQ:ETFC) shares are trading up over 4 percent after the Wall Street Journal reported that TD Ameritrade (NASDAQ:AMTD) may be interested in making a bid for the company. Eaton (NYSE:ETN) and Lorillard (NYSE:LO) beat earnings expectations this morning and are trading higher.

Nasdaq 100 components Netflix (NASDAQ:NFLX) and Baidu (NASDAQ:BIDU) will report their earnings results today. S&P 500 companies reporting tomorrow include (NASDAQ:AMZN), a heavily weighted name in the consumer discretionary sector.

Among the others are Avery Dennison (NYSE:AVY), C.H. Robinson Worldwide (NASDAQ:CHRW), Cummins (NYSE:CMI), Electronic Arts (ERTS), Ford (NYSE:F), Fiserv (NASDAQ:FISV), Gilead Sciences (NASDAQ:GILD), International Game Technology (NYSE:IGT), Illinois Toolworks (NYSE:ITW), Invesco (NYSE:IVZ), Jacobs Engineering (NYSE:JEC), Linear Technology (NASDAQ:LLTC), Lockheed Martin (NYSE:LMT), Lexmark International (NYSE:LXK), 3M (NYSE:MMM), Norfolk Southern (NYSE:NSC), Occidental Petroleum (NYSE:OXY), UPS (NYSE:UPS), Western Union (NYSE:WU), and U.S. Steel (NYSE:X).