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Pre-Market Primer: Stocks Lower Ahead of Fed Announcement, Existing Home Sales


Toll Brothers was hit with weak sales, but beat on the bottom line.

Markets sank worldwide and US futures are in the red ahead of the coming verdict on quantitative easing's future.

Stock index futures sank before the opening bell following a mixed trading day on Tuesday. Dow (INDEXDJX:.DJI) futures were down 0.21% at 14,954. Futures contracts on the S&P 500 (INDEXSP:.INX) fell 0.25% to 1,646.50 and Nasdaq (INDEXNASDAQ:.IXIC) futures dropped 0.24% to 3,073.50. Shares in Europe and Asia were also lower today. Ten-year Treasury yields were up one basis point at 2.83%.

The big headline will come this afternoon at 2 p.m. when the Federal Reserve releases minutes of its latest policy meeting where the members likely debated the timing of the bank's gradual pullback from open market asset purchases aimed at lowering the real cost of borrowing. Fed Chairman Ben Bernanke has stressed before that the "taper" is dependent on improving economic indicators. Many investors and economists believe that the Fed will begin to cut back from its $85 billion monthly diet of bonds and mortgage-backed securities in September.

Today will also bring some fresh information on the state of the housing market. At 10 a.m., the government is likely to report that existing home sales rose to a seasonally adjusted annualized rate of 5.08 million in June.

Earnings for homebuilders and other companies sensitive to home sales also provided a look into the market's health. Today, Toll Brothers (NYSE:TOL) reported earnings per share of $0.26, beating estimates by a penny. Revenues of $689.2 million trailed forecasts, however, so shares of the luxury builder were down 1.6% in pre-market trading.

Loew's Companies (NYSE:LOW), the second-largest home-improvement retailer, reported that earnings rose 26% from a year earlier to $0.88 per share as sales rose to $15.71 billion. Last week, Lowe's disclosed that its acquisition target, Orchard Supply Hardware, received no other bids, allowing it to proceed to buy the chain and get more access to the market in California. Lowe's shares were up 4.13% in early trading.

Target (NYSE:TGT) shares fell 1.34% after the company reported that earnings per share rose 6.1% to $1.19 on $17.12 billion in revenue. Though earnings beat expectations, US comparable store sales were weaker than expected, increasing just 1.2%.

"Target's second quarter financial results benefited from disciplined execution of our strategy and strong expense control, offsetting softer-than-expected sales," said CEO Gregg Steinhafel.

After the closing bell today, Hewlett-Packard (NYSE:HPQ) will report earnings. Analysts expect profit to fall to $0.86 per share from $1 a year ago as revenue falls 8% to $27.29 billion.

Moody's Investors services hiked its outlook on the credit rating of US states to stable from negative yesterday thanks to diminished uncertainty for federal budget cuts.

"Certain indicators remain below pre-recession levels, but slow-but-steady economic recovery and more certainty regarding the impact of federal fiscal policy are improving the credit environment for states," Moody's analysts said. "Widespread large federal budget cuts did not occur, which substantially eliminated the risk of a double-dip recession."

Moody's did warn that the cutback in government spending and federal tax increases could drag on the economy. Regional imbalances -- especially between states most hurt by the housing bubble and those like North Dakota which are experiencing resource-led booms -- is another concern.

Twitter: @vincent_trivett
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