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Futures Rally After Spanish Auction; Citi Slips

Futures held their sharp gains Tuesday after the long holiday weekend, buoyed by a successful Spanish debt auction and higher than expected growth in China, but weaker-than-expected earnings from Citi limited gains.

Among earnings, Citigroup fell in pre-market trading after the banking giant posted disappointing earnings of 38 cents a share versus an estimates of 49 cents.

Meanwhile, rival Wells Fargo reported better-than-expected earnings as the bank set aside less money to cover bad loans.

Overseas, China reported GDP growth of 8.9 percent in the fourth quarter, slowing from 9.1 percent in the previous quarters but slightly beating expectations. Chinese stocks ended the day higher and miners lifted stocks in Europe.

Investors were also encouraged after a successful auction of Spanish short-term debt, in which demand was strong and yields halved.

S&P downgraded nine euro zone countries, among them France and Austria, late on Friday and the euro zone's rescue fund, the EFSF, late on Monday.

But some analysts told CNBC the downgrades were highly anticipated, despite knocking down stocks and the euro on Friday.

On the economic front, a gauge of manufacturing in New York State rose to 13.48, its highest level since April 2011, according to the New York Federal Reserve. Economists had expected a reading of 11.0.

Carnival plunged after analysts cut earnings estimates and changed ratings on the cruise line company following the crash of one of its ships off the coast of Italy. Morgan Stanley cut the stock to "equal-weight" from "overweight," and Barclays maintained its "overweight" rating but cut 2012 and 2013 EPS estimates.

Rival Royal CaribbeanCrusies also slumped amid worries the accident will impact industry sales.

In political news, Jon Huntsman dropped out of the race to become the Republicans' presidential candidate, endorsing Mitt Romney as the man "best equipped to defeat Barack Obama'" in the autumn election.

—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC

On Tap This Week:

WEDNESDAY: Weekly mortgage apps, PPI, industrial production, housing market index; Earnings from Goldman Sachs, Bank of NY Mellon, Northern Trust, PNC Bank, State Street, US Bancorp, Ebay
THURSDAY: CPI, housing starts, jobless claims, oil inventories; Earnings from BofA, Morgan Stanley, Sony Ericsson, UnitedHealth, AmEx, Google, IBM, Microsoft, Capital One
FRIDAY: Existing home sales; Earnings from GE, Schlumberger

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