* Debt ceiling debate, earnings season worries knock futures
* Retail sales rise in Dec, NY manufacturing contracts in
* Futures down: S&P 4.5 pts, Dow 35 pts, Nasdaq 8.25 pts
By Leah Schnurr
NEW YORK, Jan 15 (Reuters) -
Wall Street was set to open lower on Tuesday as investors
fretted over the debate brewing in Washington over raising the
U.S. borrowing limit as well as what is expected to be a
lackluster earnings season.
Futures trimmed losses shortly after a batch of data that
showed retail sales rose more than expected in December, but
manufacturing activity in New York state contracted for the
sixth month in a row in January.
On Monday, President Barack Obama rejected any negotiations
with Republicans over raising the U.S. debt ceiling. The United
States could default on its debt if Congress does not increase
the borrowing limit.
Resolving the debt ceiling debate is more a question of how
than if. Investors are wary of another last-minute agreement
like the one in August 2011, said Rick Meckler, president of
investment firm LibertyView Capital Management in Jersey City,
"Of course people expect the government will not default on
its debt ... but there could be damage done in how it's
resolved," said Meckler. "A long, dragged out fight over this
damages the credibility of the government and can weaken the
global market for U.S. debt."
Speaking separately on Monday, Federal Reserve Chairman Ben
Bernanke urged lawmakers to raise the debt ceiling. The central
bank chairman also gave a cautiously optimistic outlook for U.S.
growth but no clear hints on when the Fed would curb its
aggressive bond purchases.
Corporate earnings season picks up the pace this week and
investors are bracing for disappointment. Analyst estimates for
the quarter have fallen sharply since October. S&P 500 earnings
growth is now seen up just 1.9 percent from a year ago, Thomson
Reuters data showed.
S&P 500 futures fell 6.2 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 down
35 points, and Nasdaq 100 futures lost 6.75 points.
Rounding out the economic data released before the opening
bell, producer prices fell last month as food prices declined. A
report on business inventories is on tap for 10:00 a.m. ET (1500
Although the data, on balance, was positive, reaction in the
market was likely to be limited with investors' attention on the
negotiations over the debt ceiling and spending cuts, said Hugh
Johnson, chief investment officer of Hugh Johnson Advisors LLC
in Albany, NY.
"'Fiscal Cliff Two' is now the principle focus of
investors," he said.
Homebuilder Lennar on Tuesday reported profit that
beat expectations amid a jump in new home orders. The stock lost
0.9 percent to $40.65 in premarket trading.
Forest Laboratories reported a third-quarter loss,
sending its shares down 5.3 percent at $35.60.
Shares of Dell rose 4.5 percent to $12.83 in
premarket trade the day after sources said the company is in
talks with private equity firms on a potential buyout.
Facebook added 0.7 percent to $31.15 ahead of a major
news event at its headquarters. The secretive nature of the
event has triggered a guessing game about what the company could