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US STOCKS-Wall St set to end 5 winning wks on commods slide

Published 11/12/2010, 09:09 AM
Updated 11/12/2010, 09:12 AM
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* China tightening fears sends local stocks down 5 pct

* Commodity-related stocks fall premarket

* Futures off: S&P 5.2 pts, Dow 54 pts, Nasdaq 10.75 pts (Updates market activity)

By Edward Krudy

NEW YORK, Nov 12 (Reuters) - Wall Street was set to end a five-week winning streak led lower by natural resource shares on Friday as expectations of a China interest rate hike hit commodity prices and sent local stocks into a tailspin.

The Shanghai Composite Index closed down 5.2 percent on Friday for its biggest percentage loss in over a year, while global commodities tumbled on speculation the central bank is about to raise interest rates to tackle inflation.

Futures were solidly lower during the morning but trading was volatile at the lower levels in choppiness that could spill over after the open.

"Right now the headwinds are slowly creeping back into the market," said Ryan Larson, head of equity trading at Voyageur Asset Management in Chicago. "(There's) an old saying that the market continues to walk a wall of worry. We're seeing that wall build, and build right now."

Stocks have stalled after rallying for two months in the run-up to the asset buying plan by the U.S. Federal Reserve last week. The S&P 500 is up nearly 16 percent since the end of August, while the Dow and the Nasdaq rose to levels before the collapse of Lehman Brothers over two years ago.

Resource-related stocks were likely to take the brunt of selling as crude oil dropped 1.3 percent, while copper fell 1.3 percent. In early trading, Alcoa Inc fell 1.4 percent, while Freeport-McMoRan Copper & Gold Inc was off 2.5 percent.

S&P 500 futures declined 5.2 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures fell 54 points, and Nasdaq 100 futures dropped 10.75 points.

Markets continued to fret over sovereign debt in the euro zone. EU leaders reassured investors they would not be forced to write down the value of their bond holdings in the event of a new bailout, but that appeared to do little to ease the pressure on futures.

In corporate news, graphics chipmaker Nvidia forecast higher sales for the current quarter and said its mobile business would take off next year when tablet computers and smartphones use its Tegra chips. The shares rose 4.5 percent to $13.18 premarket.

D.R. Horton Inc, the biggest U.S. homebuilder, reported a narrower quarterly loss, citing soft demand after the expiration of the federal government's homebuyer tax credit. The shares fell 1 percent to $12.04.

J.C. Penney Co Inc was off 3 percent to $31.25 after the department store retailer reported higher-than-expected quarterly profit, but total sales were hurt by its decision to wind down the "Big Book" catalog business.

The Thomson Reuters/University of Michigan Surveys of Consumers is due to be released at 9:55 a.m. (1455 GMT) preliminary November consumer sentiment index. Economists in a Reuters survey expected a reading of 69.0 compared with 67.7 in the early November report.

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