U.S. Stocks To Open Lower After Weak Durables Orders

NEW YORK (MarketWatch) -- U.S. stocks are set for a lower opening Wednesday, after the latest durable goods report depicted the economy as unexpectedly soft, with trade likely to be dull ahead of Thursday's Federal Open Market Committee decision on interest rates.

The Fed is widely expected to leave the fed funds rate steady at 5.25%, on Thursday. But investors will parse the accompanying statement for clues about whether a rate increase or cut could be in store in coming months.

New above-forecast earnings from Nike Inc. and Oracle Corp. could provide a bright spot in an otherwise dour market that remains trained on deterioration in the subprime mortgate sector.

The futures contract for the Dow Jones Industrial Average last was 11 points lower at 13,385.

Futures contracts for the S&P 500 and the Nasdaq 100 were 1.8 point off at 1,496 and down 3 points at 1,992.5.

Stocks had another negative session on Tuesday, when the Dow Jones industrials lost 14 points, the Nasdaq Composite fell 2.9 points and the S&P 500 gave up 4.9 points. The recent string of losses has been attributed to worries about subprime mortgage lenders amid declining housing markets and rising global interest rates.

The recent near collapse of two hedge funds owned by Bear Stearns Cos. Inc. with heavy exposure to the subprime mortgage market has made investors more sober about the hazards of risky credit.

Those worries are likely to remain in play on Wednesday.

"We are looking at a slightly lower opening, although there is some good corporate news," said Peter Cardillo, chief U.S. market economist at Avalon Partners. "The market remains in a very nervous state. Bailing out hedge funds is not good news for the market, so the pullback is still intact and its run has to continue for now."

In a sign of economic weakness, the Commerce Department reported that durable goods orders last month dropped by 2.8%, far exceeding the fall of 1.7% predicated by MarketWatch, amid a 22.7% decline in civilian aircraft orders.

The reports details showed that orders for U.S.-made investment goods dropped 3% in May, ending a brief rebound in businesses' capital spending

The figures undercut the theory that business investment would be robust enough to power the U.S. economy out of a slow patch that's lasted more than a year.

Stocks on the move

In premarket electronic trade shares of Nike Inc. last were 5.5% higher at $56.80. The company's fourth-quarter earnings were in line with analysts' expectations, while revenue was a bit above forecast.

Oracle Corp. shares last were 1.7% higher at $19.44. The company quarterly earnings before special items beat expectations, as did its revenue. The profit was 23% above the year-earlier level.

There were few premarket quotes for Wells Fargo & Co. , but the stock could be active later. The bank has named John Stumpf CEO to replacing Dick Kovacevich, who will retain his chairman's post.

Dow Jones & Co. Inc. , the publisher of this report, remains in the news. News Corp. Chairman Rupert Murdoch was quoted in a media report saying that he has no plans to raise his $5 billion bid for Dow Jones. He expects Dow Jones controlling shareholders, the Bancroft family, to either approve the deal "in the next two, three weeks' time or not at all," Reuters quoted him as saying.

On Tuesday the company's talks with News Corp moved ahead as both sides reached a preliminary understanding on a deal to protect the editorial integrity of The Wall Street Journal.

There's a new privae-equity deal. Guitar Center Inc. agreed to be bought by affiliates of Bain Capital Partners LLC, a private investment company, for about $2.1 billion.

Other markets

Treasurys rallied after the weaker-than-expected durable goods report, which adds fuel to the case that the Fed can afford to cut rates, a move the bon market would like to see. "The bond-friendly durables plunge sent yields sharply lower to fresh session lows," said Action Economics.

The benchmark 10-year Treasury note last was up 9/32 at 95-26/32 with a yield of 5.046%.

The durable goods data was negative for the dollar, as it decreases the chances for a Fed rate hike which would make the currency more attractive against its major rivals. The dollar last was 0.5% lower at 122.37 yen, as the euro fell 0.08% to $1.3436.

Crude trending lower ahead of data expected to show increases in energy inventories in the latest week. The August contract last was off 39 cents at $67.38 a barrel.

Gold futures were pressured by the expanding risk-aversion trade, as the August contract gave up 10 cents to $645.20 an ounce.

By Leslie Wines