Wall Street set for lower open on US debt gridlock

NEW YORK: US stocks were set for a lower open on Monday as political brinkmanship in Washington over the US debt ceiling sparked fears of a US rating downgrade, sending world equities lower and pushing gold to a record high.

A divided US Congress pursued rival budget plans that appeared unlikely to win broad support, pushing the country closer to a debt default.

While analysts expected a deal to raise the debt ceiling by Aug. 2, the United States moved one step closer to losing its coveted triple-A credit rating as Democrats and Republicans seemed unlikely to reach a deal.

White House Chief of Staff Bill Daley warned of a "few stressful days" ahead for financial markets, but Treasury Secretary Timothy Geithner was confident a deal would be reached that has been offset by positive earnings news. Major indexes notched solid gains last week, with the S&P 500 and Nasdaq rising more than 2 percent.

"I don't think politicians are willing to give up the microphone until the very last minute. They will draw all the attention that they can get, and once that is over the market will return to focusing on the what's really important, which is that the companies are coming out with good results," said Joseph Greco, managing director at Meridian Equity Partners in New York.

S&P 500 futures fell 10.9 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 slid 94 points and Nasdaq 100 futures lost 16.25 points.

European shares dipped in early trade, threatening a one-week rally, as banking stocks dropped. US-listed shares of Barclays fell 4.1 percent to $14.96 in premarket trade.

Gold surged to a record high above $1,620 an ounce in Asian trading, the fifth record high for bullion in less than two weeks.

Also rattling investors, credit rating agency Moody's cut Greece's sovereign debt by three notches on Monday to 'Ca', just one level above default. Greece has the lowest rating of any country in the world covered by Moody's.

Kimberly-Clark Corp shares fell 0.7 percent to $67.40 in premarket trade after the maker of Kleenex tissues said 2011 earnings may be at the low end of its forecast even as it topped second-quarter expectations.

Investors also awaited earnings from Texas Instruments Inc and Anadarko Petroleum Corp.

On Friday, promising chipmaker earnings and optimism about a debt deal triggered a move into growth-oriented shares such as technology.

Copyright Reuters, 2011