US stocks were set for a lower open today as investors looked to book profits a day after a powerful rally that propelled the S&P to close above its 200-day moving average for the first time since August.
Yesterday, the market soared 3 per cent after a long-awaited agreement was struck to help contain the region's two-year debt crisis. The S&P 500 is up more than 13 per cent this month, on pace for its biggest monthly gain since October 1974.
But the market remained skeptical over the debt deal as many details were still to be worked out before the region can show its ability to contain the crippling crisis.
European stocks dropped from a 12- week high as investors waited to discover how the euro area plans to fund its enlarged bailout facility.
The head of Europe's bailout fund played down hopes of a quick deal with China to throw its support behind efforts to resolve the crisis but said he expects Beijing to continue to buy bonds issued by the rescue fund.
S&P 500 futures fell 8.5 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 lost 67 points, and Nasdaq 100 futures fell 9.50 points.
"The big news of the week was yesterday, and today we're seeing typical price action after that kind of move. We may see a consolidation over the next week, but then a sustained rally after that," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York.
The latest economic data showed sluggish growth in US consumer income in September that led households to cut back on saving to increase spending.
A separate government report showed wages and salaries expanded 0.3 per cent in the third quarter - the smallest rise in a year.
Analysts cautioned there was still a long way to go to find a lasting solution to Europe's economic woes, but the initial measures reached by euro zone leaders reinforced growing confidence in recent days that they were prepared to tackle the issue seriously.
"The measures announced are partly political and some details about their implementation are still lacking," said Cyril Beuzit, strategist at BNP Paribas.
"However, although these measures may not yet be seen as the final solution ... they are clearly a step in the right direction, which should help restore some confidence in the market."
The Stoxx Europe 600 Index retreated 0.3 per cent to 248.58 at 2.19pm in London. The gauge surged 3.6 per cent yesterday after the region's leaders said they will boost their rescue fund's capacity to €1 trillion in a bid to stem the debt crisis. The Stoxx 600 is headed for a weekly gain of 4.1 per cent, its biggest rally this month.
"The situation is not resolved," said Monika Rosen, the head of global research at UniCredit SpA in Vienna. There is a need for "political consensus between all these euro nations. That is the difficulty we are trying to solve. It's a consensus- building process that makes it slow and unclear. Markets are still skeptical."
National benchmark indexes declined in 14 of the 17 western-European markets that are open today. The UK's FTSE 100 Index slid 0.3 per cent and France's CAC 40 Index retreated 0.6 per cent. Germany's DAX Index slipped 0.2 per cent. The Dublin market was off 0.6 per cent at 2748.57.
Agencies
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/VR3765MFOBH2NMV2QNICYDF67M.png)