U.S. stock futures were sharply lower on Tuesday, pointing to a weak market open as crude oil prices held above $54 a barrel, amid an early burst of third-quarter earnings reports. Merrill Lynch & Co. said its third-quarter profit fell 8 percent from a year earlier, hurt by reduced investment banking and trading though it beat analyst expectations. Merrill shares fell 75 cents, or 1.5 percent, to $50.25 in pre-market trade on the INET electronic brokerage system. Diversified health-care company Johnson & Johnson said its quarterly profit rose on higher sales of prescription drugs and medical devices.
S&P 500 futures were down 8 points, below fair value accounting for dividends, interest rates and time to expiration on the contract, indicating the market would open lower. Dow Jones industrial index futures fell 59 points, while Nasdaq futures were down 15.5 points. Two car dealers gave disappointing forecasts on Tuesday, with Asbury Automotive Group Inc. saying that third-quarter earnings would fall below Wall Street's estimates. Sonic Automotive Inc. cut its earnings estimate for the year and forecast a third-quarter profit well below analysts' expectations.
Meanwhile, U.S. light crude rose 41 cents to $54.05, after hitting a record $54.45 a barrel earlier in the session on worries of production restraints in the U.S. Gulf, Nigeria and Norway. Oil prices have soared 65 percent this year. "It's looking a little grim at the open. Oil holding above $54 a barrel is not helping the tone," said Bryan Piskorowski, market analyst at Wachovia Securities LLC. Piskorowski said with many on Wall Street taking the day off on Monday for the Columbus Day holiday, the market was able to shrug off record oil prices. The spike in crude is a major concern for Wall Street, as higher energy costs squeezes profits from most companies, while a rise in fuel prices can curb consumer spending. Also weighing on U.S. stock futures was European and Asian shares, which traded broadly lower on Tuesday. Nasdaq futures held below 15 points throughout the morning, indicating tech shares would come under pressure ahead of Intel Corp.'s earnings report after the bell.
Intel, the world's largest semiconductor maker, warned last month its revenue and profit margin for the third quarter would not be as high as previously thought due to weaker-than-expected demand for its chips. Semiconductor-related stocks will also be eyed after industry data on Tuesday showed global sales of chip-making equipment fell 29 percent in August from July, led by sharp declines in China and North America. Shares of financial services company State Street Corp. may come under pressure after the company reported lower quarterly profit. Shares of waste hauler Allied Waste Industries Inc. will be eyed after the company said it would book up to $10 million in charges for restructuring its field organization, reducing the number of its regions and trimming jobs.///