Stock index futures fell on Tuesday as talks to resolve Greece's debt crisis stumbled again and analysts pointed to a short-term top in equity markets after the S&P 500 posted five days of back-to-back gains.
Euro zone finance ministers rejected an offer by private bondholders to help restructure Greece's debt, sending negotiators back to the drawing board and raising the threat of a messy Greek default.
The news from Greece overshadowed solid, but largely unspectacular corporate earnings reports. This week marks one of the busiest in the ongoing fourth-quarter earnings season.
It seems like the weight of some of the European-related issues have finally triggered a bit of a setback for equity prices, at least on a premarket basis, said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
Luschini said that the wording of a Greece default agreement would be key. He warned that any decision that prevented credit default swaps on Greece's debt from being triggered could unnerve the market.
After a dearth of bad news from Europe late last year and signs of an improving U.S. economy, the S&P 500 has run up gains of more than 22 percent from lows in October. Investors are now focused on U.S. earnings in a critical period this week and next.
S&P 500 futures fell 8.6 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 were off 59 points, and Nasdaq 100 futures lost 11.5 points.
Earnings from some large U.S. corporations, including McDonald's Corp
They were on balance decent if not spectacular, said Luschini, adding that he was looking to large industrial companies such at 3M Corp
DuPont reported higher-than-expected quarterly profit as strong agricultural sales helped offset a drop in volume in every other business unit. The shares were unchanged at $49.34 .
McDonald's Corp's quarterly profit beat analysts' estimates as sales at established restaurants rose more than 7 percent in the United States and Europe. The stock was up 0.5 percent to 101.42 in premarket trading.
Technical factors may be putting a cap on equities. We continue to see evidence of a short-term peak developing, said Robert Sluymer, a technical analyst at RBC Capital Markets in New York. Within the U.S. equity markets, leading groups are beginning to pause or pull back.
Sluymer saw banks as one sector that may pull back. A recent rally in the sector has encouraged investors after heavy losses last year. There was early evidence of weakness as Bank of America Corp
The Federal Open Market Committee begins a two-day meeting on Tuesday.
The U.S. central bank will also begin a new practice of announcing policymakers' interest rate projections when the meeting ends on Wednesday in a move it hopes will bring greater public clarity to its decision-making. They are expected to start hiking interest rates again only in the first half of 2014, a Reuters poll showed.
(Reporting By Edward Krudy editing by Jeffrey Benkoe)