Futures Turn Lower After China Rate Hike

Futures were lower Wednesday as traders were disappointed by China's latest attempt to slow inflation and some bad news from the jobs market.

Stocks ended mostly flat in the previous session, as investors shrugged off a downgrade for Portugal’s sovereign debt.

The Moody’s downgrade of Portugal’s credit rating had already been priced in, analysts said, but five-year credit default swaps (CDS) on Portuguese government debt rose to a record high and yields on Portuguese bonds spiked on Wednesday.

The Chinese central bank approved an increase of 0.25 percentage points, the nation's latest move to cool growth.

Meanwhile, the number of planned layoffs increasedfor the second month in a row, according a report from job outplacement firm Challenger, Gray & Christmas. This comes ahead of a number of key employment news starting with ADP's jobs survey and weekly jobless claims on Thursday and the government's monthly report on Friday.

On the tech front, Apple has placed orders for key parts in a next-generation iPhone which it is preparing to launch by year-end, according to people familiar with the situation. The new iPhone is rumored to use wireless chips from Qualcomm , instead of Samsung, used in the current iPhone4.

Netflix declined after Merriman Capital downgraded the online-video streaming firm to "neutral" from "buy." The company hit another all-time high following news that it will expand service in 43 countriesin South and Central America along with the Caribbean later this year.

Meanwhile, Berkshire Hathaway has made a bid for Citigroup'sconsumer lending unit OneMain, according to the Wall Street Journal said, citing people familiar with the matter.

Walgreens gained after the drugstore chain reported better-than-expected June sales.

In other economic news, the Mortgage Bankers Assocation reported that application activity dipped 5.2 percent last weekeven though actual home loan requests rose. The overall drop came from a plunge in refinancing requests.

The June ISM Non-manufacturing Survey is expected at 10 am. Economists expect the index to fall to 54.0 from 54.6.

President Obama will answer questions from Twitter usersaround the country in a town hall hosted by the social media service, focusing on jobs and the economy. He will also summon lawmakers to the White House on Wednesday to start new talks on raising the debt ceiling.

European shares snapped a seven-day winning streak, led by banks, as euro sovereign debt worries resurfaced after Moody's cut Portugal's credit rating.

On Tap This Week:

WEDNESDAY: ISM non-mfg index, Obama townhall on economy, NYSE shareholders vote on DB merger
THURSDAY: ADP employment report, jobless claims, oil inventories, chain-store sales
FRIDAY: Non-farm payroll, wholesale trade, consumer credit

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