Stock index futures pointed to a weaker open Tuesday after China's central bank raised key rates for the second time in just over a month and as a handful of earnings reports disappointed.
The timing was a surprise, coming on the final day of the Lunar New Year holiday, but investors have long expected more monetary tightening as Beijing struggles to rein in price pressures and ward off a property bubble.
Gold prices edged above $1,360 an ouncedespite China's rate rise, while oil slipped below $87 a barrel.
The Federal Reserve should seriously consider pulling back on its $600 billion stimulus program given stronger growth and a brighter jobs picture, said Richmond Fed President Jeffrey Lacker at a business gathering at the University of Delaware.
Despite a report last week showing only 36,000 jobs were created in January, Lacker said other measures were pointing to a firmer economic recovery and better employment prospects.
"An array of forward-looking indicators of employment trends point to continued labor market improvement," said Lacker.
There are a host of other Federal Reserve speakers scheduled throughout the day: Atlanta Fed President Dennis Lockhart speaks at 12:30 pm ET, and Dallas Fed President Richard Fisher speaks at 1:30 pm ET.
In the day's earnings news, Toyota reported a 47.6 percent drop in quarterly profit, hit by slumping Japanese car sales and a firm yen that underlied its exposure to loss-making exports, but lifted its forecast as cost cuts kicked in.
Meanwhile, ArcelorMittal reported a quarterly loss, but the world's largest steel maker predicted 2011 will be better than 2010.
And Swiss bank UBS said it expects to win back more business from clients in 2011and has laid the foundations for a rebound in its investment bank.
Sara Lee reported earnings that missed Wall Street estimates by a penny, as the weaker euro hurt sales.
With more than half of the S&P 500 companies' quarterly results in, 72 percent have beat expectations.
Disney , McAfee and Take Two are expected to report earnings after-the-bell tonight.
Meanwhile, McDonald's said global sales at established restaurants climbed 5.3 percent in every region except the U.S., where sales were only up 3.1 percent. Wall Street expected global sales and U.S. sales each to rise 4.4 percent.
Intel said it will resume shipping known configurations of a flawed chipset that work for use with its new processors. The action was in response to demands from personal computer makers that will use the chips selectively.
On the economic front, confidence among small U.S. business owners rose to a three year high in January, but concerns about sales saw owners remain cautious about hiring and spending plans, according to a survey from the National Federation of Independent Business.
The optimism index rose 1.5 points to 94.1, the highest reading since December 2007 when the recession started.
Treasury is scheduled to auction $32 billion in 3-year notes at 1 pm ET.
Basic materials stocks will continue be in focus as the price of copper hit a record high on concerns about supply and after economic data boosted the outlook for demand.
A flurry of merger and acquisition news dominated headlines on Monday.
Diversified industrial company Danaheragreed to buy medical diagnostics company Beckman Coulterin a transaction valued at about $6.8 billion including debt. Beckman shares jumped 10 percent.
EnsCo said it would acquirerival Pride International for about $7.3 billion in a deal that would create the world's second-largest offshore oil and gas driller, according to the companies. Pride International shares soared almost 15 percent.
And struggling US Internet company AOLagreed to buyThe Huffington Post for $315 million.
Coming Up This Week:
TUESDAY: Atlanta Fed President speaks, Dallas Fed President speaks, 3-year Treasury note auction; Earnings from Disney, McAfee and Take Two.
WEDNESDAY: Weekly mortgage applications, oil inventories, 10-year Treasury note auction, Bernanke testifies before U.S. House, Fannie/Freddie reform hearing, AmEx analyst meeting, HP announces new mobile strategy, Moody’s briefs on sovereign debt ratings; before-the-bell earnings from Coca-Cola, Nissan; after-the-bell earnings from Cisco, Activision Blizzard, MetLife, Prudential and WholeFoods.
THURSDAY: BoE announcement, jobless claims, wholesale trade, Atlanta Fed speaks, 30-year Treasury bond auction, Treasury budget, Ebay investor day, Verizon iPhone goes on sale; before-the-bell earnings from PepsiCo, Philip Morris and Sprint; after-the-bell earnings from Kraft and Expedia.
FRIDAY: International trade, consumer sentiment, Nokia analyst day; earnings from Discovery Communications.
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