Pre-Market Down on Inflationary Concerns

Includes: DIA, IEF, QQQ, SPY
by: SA Admin Jonathan Liss

Friday’s across-the-board losses looked likely to spill over into Monday’s session as U.S. futures tracked broadly lower. S&P 500 futures led the pack, down 6.8 points to 1,471.60, while the Nasdaq 100 fell 9 points and the Dow slid 77 points. The declines followed a global selloff Monday, with the Nikkei off by 1.71%, the Hang Seng down 3.51% (full story), and the FTSE lower by 1.25% in intraday action (full story).

Chief among the reasons for the global selloff were continued inflationary concerns in the U.S., Europe and China – all of which recently reported multi-year highs in inflationary data. While mounting mortgage-related losses have tightened the availability of credit both on a corporate and retail level, growing inflation is likely to raise questions as to how much more central banks can continue to loosen monetary policy. The Fed only cut rates 25 bps last Tuesday (Dec. 11), as it likely had a preview of Thursday and Friday’s higher-than-anticipated PPI and CPI reports, spurring a widespread U.S. selloff (full story).

Former Federal Reserve Chairman Alan Greenspan did not help matters when he declared on ABC’s ‘This Week,' “The probabilities of a recession have moved up to close to 50 percent” (full story). The Wall Street Journal says a group of about 50 large debt investors have formed a consortium called the Credit Roundtable. The group will publish a white paper Monday detailing problems and proposed fixes related to protection in contracts of investment-grade bonds.

The National Retail Federation estimates holiday spending will grow just 4% this year, the slowest growth rate in five years, leading retailers to offer last minute holiday shoppers “steep discounts” (full story).

Ingersoll-Rand (NYSE:IR) agreed to buy Trane Inc. (TT), formerly American Standard Companies, for a combination of cash and stock valued at about $10.1B (full story). ACE Ltd. (NYSE:ACE) will acquire Aon Corp.'s (AOC) Combined Insurance Co. unit and some other subsidiaries for $2.4 billion in cash (full story). Plains Exploration & Production (NYSE:PXP) announced it will sell oil and gas properties to Occidental Petroleum (NYSE:OXY) and XTO Energy (XTO) for $1.75 billion (full story). A consortium of Goldman Sachs (NYSE:GS), Abu Dhabi's ever-expanding investment arm and others will invest $1.4 billion into privately-held Related Cos. (full story).

Crude is down 0.71% to $90.62 while gold is lower 0.48% to 794.20. The yield on 10-year Treasuries fell to 4.21% as prices climbed to 100-10½. At 8:30 AM ET today, data on Q3 Current Accounts and the December NY Empire State Index on manufacturing activity are due out, followed by October Net Foreign Purchases at 9:00 AM ET.

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