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Pre-Market Primer: Markets Reel From Italian Deadlock; US Futures Up Ahead of Housing Data, Bernanke Testimony

Vincent Trivett

US stock index futures rose this morning despite political deadlock in Italy that prompted a sell-off in European equities and bonds.

Fed Chairman Ben Bernanke will begin his two-day semi-annual testimony before Congress at 10:00 a.m. Today, he will face the Senate Banking Committee.

US investors also have a full economic calendar as well. At 10:00 a.m. February consumer confidence numbers come out. Economists expect to see the index rise 2.4 points to 61.0. The housing market will also be in focus. At 9:00 a.m., the S&P/Case-Shiller home price index is expected to show a 0.8% rise in the price of homes in January in the 20 cities that it studies, after rising 0.6% in December 2012. The Federal Housing Finance Agency is also expected to simultaneously report a 0.7% increase in home prices. New home sales are expected to have sold at a seasonally adjusted annualized rate of 381,000 in January, after hitting a rate of 369,000 in the month before.

Before the opening bell, Dow (INDEXDJX:.DJI) futures are up 0.23% at 13,820. Futures on the S&P 500 (^INX) rose 0.25% to 1,491.20 and Nasdaq (^IXIC) futures climbed 0.18% to 2,707.25.

The election results in Italy could result in its economic and fiscal reforms rolling back. The center-left group led by Pier Luigi Bersani narrowly won the lower house of Parliament, but the Senate produced no winners. Reformer Mario Monti's party came in fourth place and the two parties did not garner enough seats to form a coalition, as expected. Comedian Beppe Grillo surprisingly won a plurality of votes. Silvio Berlusconi ruled out forming a coalition with Monti, but might join forces with Bersani.

The euro fell to $1.3097 on the dollar today on the Italian political deadlock. Italian 10-year bond yields jumped to 4.86% from 4.37% before the election, the biggest jump this year. At a bond auction today, Italy sold 8.75 billion euros of short-term debt at an average interest rate of 1.237%, up from 0.73% at a sale last month. Spanish yields also rose 30 basis points to 5.4%. Italy's FTSE MIB (INDEXFTSE:FTSEMIB) stock index slipped 4.18%, with financial shares falling as much as 10%. Trading on some Italian banks was halted almost immediately at the market open. French, German, Spanish, and UK stock indices all declined.

In corporate news, Home Depot (HD), the biggest US home improvement retail chain, posted earnings of $0.68 per share, beating estimates by $0.04. The company also said that it will earn $0.07 per share more than expected in the current quarter and announced that it will buy back $17 billion in shares and increase its quarterly dividend by 34%. As with rival Lowe's (LOW), which reported yesterday, Hurricane Sandy and an improving housing market contributed to Home Depot's sales and profits.

Yesterday, Hewlett-Packard (HPQ) unveiled a seven-inch tablet computer running Google's (GOOG) Android operating system. At $169, the tablet undersells Amazon's (AMZN) Kindle Fire as well as Google's own similar offering.

Twitter: @vincent_trivett

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