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US STOCKS-Wall St set to fall on concern over China, Europe banks

Wednesday, 23 Oct 2013 | 9:00 AM ET

* PBOC may tighten cash supply to address inflation risks

Corning jumps, Samsung unit may become largest shareholder

* Caterpillar falls after results, Boeing up

* Futures off: Dow 74 pts, S&P 9 pts, Nasdaq 17 pts

By Rodrigo Campos

NEW YORK, Oct 23 (Reuters) - U.S. stocks were set to fall at the open, following four straight days of record highs on the S&P 500, amid concern over tightening financial conditions in China and weakness in European banks.

Two key Dow components highlighted a mixed earnings picture on Wall Street, with Caterpillar shares down 4.5 percent after cutting its full-year earnings forecast, and Boeing up 2.8 percent after raising its outlook for the year.

Major global equity markets weakened as China's primary short-term money rates rose on concern the People's Bank of China may tighten its cash supply to address inflation risks, a move that could hurt growth in the world's second-largest economy.

Further hurting bullish sentiment, the European Central Bank said it would put top euro zone banks through rigorous tests next year to build confidence in the sector. However, some analysts say if the review reveals unexpectedly large problems it could backfire by undermining the confidence it aims to bolster.

"Stocks are vulnerable at these levels and it doesn't take much of a push, whether it is weak Asian markets, a weak banking sector in Europe or a cloudy earnings picture, to have things roll over," said Art Hogan, managing director at Lazard Capital Markets in New York.

"We got to all-time highs and investors got a bit of vertigo."

S&P 500 futures fell 9 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 fell 74 points and Nasdaq 100 futures lost 17 points.

The S&P 500 closed Tuesday at 1,754.67 after climbing earlier in the day to near 1,760. Its 23-percent year-to-date gain is just shy of its 23.5-percent advance in 2009, the index's best year in the past decade.

Shares of Caterpillar Inc fell 4.5 percent in premarket trading after the mining and construction equipment company posted a lower-than-expected quarterly profit and cut its full-year forecast again.

Boeing Co reported a rise in adjusted profit in the third quarter and raised its full-year forecast, sending its shares up 2.9 percent in premarket trading.

A unit of Samsung Electronics could become the biggest shareholder of Corning Inc, the maker of scratch-resistant Gorilla Glass used in many mobile gadgets. Corning shares jumped 20 percent in premarket trading.

Broadcom, programmable chipmaker Altera and radio frequency chipmaker RF Micro Devices on Tuesday joined Intel and Texas Instruments on a list of semiconductor companies that have unveiled underwhelming quarterly forecasts over the past week.

Broadcom shares fell 8.1 percent in premarket trading, Altera fell 7 percent and RF Micro lost 6.7 percent.

Shares of Cree Inc fell 16.4 percent in premarket trading after the maker of light-emitting diodes forecast current-quarter earnings below analysts' estimates.

According to Thomson Reuters data through Tuesday morning, of 128 companies in the S&P 500 that have reported earnings, 63.3 percent have topped analysts' expectations, in line with the beat rate since 1994 but below the 66 percent rate of the past four quarters.