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Futures Pare Losses in Volatile Trading

Futures shaved some losses Tuesday after investors shrugged off news that trade deficit jumped more than expected. Investors had been concerned over the spreading debt crisis in Europe in addition to an ongoing struggle to break the impasse over a reduction in the U.S. deficit.

Futures also pared losses following chatter that the European Central Bank was buying peripheral paper for the first time in three months, with Portugal the suspected target of the purchases.

Euro zone finance ministers promised late on Monday to provide a more flexible rescue fund and to help Greece and other euro zone debtor nations, but markets were not convinced by the reassurances.

The Dutch finance minister said a selective default on Greek debt was no longer excluded from the talks.

A newspaper report saying six Spanish banks had failed new European banking stress tests—the results of which are due to be released on Friday—added to nervousness.

On the economic front, U.S. trade deficit surged in May to the highest level in almost three years, due to a big increase in oil imports, according to the Commerce Department. The deficit increased 15.1 percent to $50.2 billion in May.

In the U.S., President Obama will once again meet congressional leaders to discuss raising the debt ceiling and avert a looming debt default.

Investors will also focus on minutes from the Federal Reserve Open Market Committee’s last meeting, released at 2 pm ET, to provide an insight into the Fed’s thinking on the economic recovery in the world’s largest economy.

Dow component is among stocks to watch after the aluminum maker kicked off second-quarter earnings seasonwith profit which came in line with forecasts but with a disappointing outlook.

Analysts said this could add to pressure on stocks Tuesday, fueling fears of a weak second-quarter earnings season.

Among techs, Cisco slipped following news the networking equipment company could eliminate as many as 10,000 jobs, or about 14 percent of its workforce, to revive profit growth, according to Bloomberg, citing people familiar with the matter.

And the chief patent counsel at Apple , Chip Lutton Jr., is leaving the company, Reuters reported, citing sources. It is unclear why he is leaving the group, Reuters said.

News Corp jumped almost 5 percent after the media giant announces $5 billion stock repurchase program.

Campbell Soup edged higher after the maker of canned soup said it expects this year's sales to be comparable to 2010's, with earnings up about 1 percent, as it sets out to expand.

European stocks were lower, with banks plunging as investors continued to worry that Greece’s debt problems will spread to Italy and Spain.

Coming Up This Week:

TUESDAY: 3-yr note auction, FOMC Minutes
WEDNESDAY: Weekly mortgage apps, import & export prices, Bernanke speaks, oil inventories, 10-yr note auction; Earnings from Yum Brands
THURSDAY: PPI, retail sales, jobless claims, business inventories, 30-yr bond auction, money supply, NPD video games sales; Earnings from JPMorgan and Google
FRIDAY: CPI, Empire state mfg survey, industrial production, consumer sentiment, credit card default rates reported, Dell shareholder mtg; Earnings from Citigroup and Mattel

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