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Stocks May Move Modestly Lower In Early Trading - U.S. Commentary

2/22/2012 8:55 AM ET

After turning in a mixed performance in the previous session, stocks may move to the downside in early trading on Wednesday. The major index futures are currently pointing to a modestly lower open for the markets, with the Dow futures down by 9 points.

The downward momentum for the markets is partly due to the release of some disappointing European economic data, which has led to renewed concerns about a recession in the eurozone.

The report from Markit Economics revealed that private sector activity in the eurozone contracted in February, with the corresponding composite output index dipping below the '50' cut-off mark to 49.7.

A separate report showing the fourth consecutive monthly contraction in Chinese manufacturing activity has also generated some negative sentiment.

On the U.S. economic front, the National Association of Realtors is scheduled to release its report on existing home sales in the month of January at 10 am ET. Existing home sales are expected to edge up to an annual rate of 4.69 million in January from 4.61 million in December.

Shares of Dell (DELL) are likely to come under pressure in early trading, with the computer maker down by 6.6 points in pre-market trading after reporting weaker than expected fourth quarter earnings.

Dell reported fourth quarter adjusted earnings of $0.51 per share, a penny below analyst estimates. The company also issued disappointing revenue growth guidance for the first quarter.

Luxury homebuilder Toll Brothers (TOL) reported a first quarter loss of $0.02 per share compared to analyst estimates for a profit of $0.02 per share. The company also reported weaker than expected revenues.

Meanwhile, Brocade (BRCD) reported better than expected first quarter earnings and also issued in-line guidance for its second quarter.

Stocks saw some volatility over the course of the trading day on Tuesday, eventually ending the session mixed. While news of a second rescue package for Greece generated some buying interest, the markets encountered resistance following recent strength.

After reaching a high above 13,000, the Dow gave back some ground but still ended the day up 15.82 points or 0.1 percent at 12,965.69. The S&P 500 also edged up 0.98 points or 0.1 percent to 1,362.21, while the Nasdaq slipped 3.2 points or 0.1 percent to 2,948.57.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index advanced by 1 percent, while Hong Kong's Hang Seng Index ended the day up by 0.3 percent.

Meanwhile, the major European markets have moved to the downside on the day. While the German DAX Index is down by 0.8 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index have fallen by 0.4 percent and 0.3 percent, respectively.

In commodities trading, crude oil for April delivery is down $0.47 at $105.78 a barrel in its first day of trading as the front month contract. The March futures expired at $105.84 a barrel on Tuesday, up $2.60 on the day.

Gold futures are sliding $6 to $1,752.50 an ounce. In the previous session, gold jumped $32.60 to $1,758.50 an ounce.

On the currency front, the U.S. dollar is trading at 80.32 yen compared to the 79.7402 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.3233 compared to yesterday's $1.3234.

by RTT Staff Writer

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