US STOCKS-Index futures edge lower ahead of jobless claims

Wed Nov 10, 2010 8:18am EST

Related Topics

* Weekly jobless claims on tap due to Thursday holiday

* Futures off: S&P 2.1 pts, Dow 13 pts, Nasdaq 2.75 pts

* For up-to-the-minute market news see [STXNEWS/US] (Updates market activity)

By Edward Krudy

NEW YORK, Nov 10 (Reuters) - Concerns over the effects of the U.S. Federal Reserve's asset purchases and European sovereign debt kept the lid on stock index futures on Wednesday, while a stronger dollar and weaker commodity prices weighed on global equities.

Gold and silver exchange-traded funds gained in premarket action as cautious investors were attracted to perceived safe-haven precious metals. The silver ETF (SLV) rose 3.6 percent to $27.10 while the gold ETF (GLD) gained 0.6 percent to $136.48.

Equities have stalled this week after a two-month run-up in stock prices before the Fed's decision to purchase $600 billion in Treasury debt in a bid to spur a sluggish economy. Since the end of August the S&P 500 has advanced 16 percent.

With the Fed's move and midterm elections in the rearview mirror, investors have been trying to assess the wider impact of the so-called quantitative easing, while revisiting concerns about European debt and the economy.

Rick Meckler, president of investment firm LibertyView Capital Management in New York, said investors were struggling to understand the Fed's action and even seeing it as a "shell game."

"You have a government that is deeply in debt, using a governmental arm to buy back debt in the marketplace," he said. "It's something that is not easily understood by investors, particularly international investors."

European stocks fell slightly in morning trade, tracking losses in commodity prices that were sparked by weak Chinese import data and strength in the U.S. dollar. The combination has been a strong headwind for U.S. stocks in the absence of other catalysts. For details, see [ID:nTOE6A903Y]

The dollar rose 0.4 percent against a basket of major currencies .DXY to hit its highest levels since late October as the euro extended losses over worries about euro zone sovereign debt. In the latest developments, Ireland's central bank said it would take a closer look at banks' residential mortgage books.

S&P 500 futures SPc1 declined 2.1 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures DJc1 fell 13 points, and Nasdaq 100 futures NDc1 dipped 2.75 points.

The S&P 500 is at overbought levels. Its relative strength index (RSI) is at over 80, the upper end of the scale. The index is also running into resistance at around 1,228, the closely followed Fibonacci 61.8 percent retracement of the decline between highs in 2007 and a 12-year low in March 2009.

Oil fell for a second day in a row as a result of a dollar rally, reining in the bullish effect of a surprise drop in U.S. inventories. [ID:nLDE6A90F4]

Weekly jobless claims were due Wednesday morning, coming a day early because of the U.S. Veterans Day holiday. Initial jobless claims are expected to have fallen to 450,000 in the latest week, economists predicted.

China's central bank also rattled investors by ordering banks to boost reserve requirements by 0.5 of a percentage point in an apparent move to curb rapid credit growth, three sources told Reuters. [ID:nSGE6A9091] (Reporting by Edward Krudy; editing by Jeffrey Benkoe)

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