(Repeats for additional readers)
* Global stocks drop
* North Korea threatens military action
* Fears mount over euro-zone banking system
* Futures off: Dow 188 pts, S&P 24.2 pts, Nasdaq 34.25 pts
* For up-to-the-minute market news see []
By Edward Krudy
NEW YORK, May 25 (Reuters) - U.S. stock index futures fell
sharply on Tuesday, tracking a steep sell-off in global
equities, on worries over Europe's banking sector and as North
Korea ramped up rhetoric against the South.
World stocks slid, with Japan's Nikkei closing down 3.1
percent and European shares dropping 2.5 percent on renewed
worries over the euro-zone banking sector after the Bank of
Spain rescued a local lender over the weekend.
Three-month dollar Libor rates rose to their highest level
since July as banks became more wary of lending to European
institutions. A higher interbank rate can crimp bank profits.
The euro neared a four-year low versus the dollar and
safe-haven treasuries rallied.
Some big banks and industrial stocks fell in premarket
trading on fears that Europe's debt crisis might derail a
global economic recovery. Bank of America Corp <BAC.N> fell 2.6
percent to $15, and Alcoa Inc <AA.N> fell 4.2 percent to
$10.62.
North Korea's rhetoric threatening military action against
the South helped send local shares to a 15-week closing low as
Seoul's government convened an emergency session. The threats
followed the sinking of a South Korean warship, allegedly by
the North in March. For details, see []
"We have got another round of taking off the risk trade
going on around the world, and we're doing it in pretty
dramatic fashion," said Art Hogan, chief market analyst at
Jefferies & Co in New York.
Hogan noted a pattern in recent days of the futures market
exaggerating a sell-off before markets opened, adding that may
be the case on Tuesday.
S&P 500 futures <SPc1> fell 24.2 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 <DJc1> sank 188
points, and Nasdaq 100 futures <NDc1> lost 34.25 points.
The S&P 500 has entered a technical correction, falling
more than 10 percent from a peak on April 23. If the index
closes under its May 6 "flash crash" low of 1,065.79,
chart-minded traders said greater losses may follow. The next
important level is the February closing low of 1,056.74.
The Dow industrials are set to open under 10,000 after
trading below that level on an intraday basis on Friday.
Commodities were also caught up in the selling. Crude oil
futures dropped 3.1 percent below $68 a barrel, while copper
fell about 3 percent.
At 9 a.m. EDT <1300 GMT>, the S&P/Case-Shiller Home Price
Index for March will be released, with economists expecting a
fall of 0.3 percent versus a decline of 0.1 percent in the
previous month. The data comes as the expiration of a
government tax credit threatens to slow a housing market
recovery.
At 10 a.m. EDT <1400 GMT>, the Conference Board reports May
consumer confidence, and economists forecast a reading of 59.0,
compared with 57.9 in April.
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To access Reuter Insider analysis on sell-off, click
http://link.reuters.com/zud36k
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(Reporting by Edward Krudy; editing by Jeffrey Benkoe)
