Stock Futures Drop After Iran Blast News

Yahoo! News - Stock Futures Drop After Iran Blast News

By Anupama Chandrasekaran

NEW YORK (Reuters) - U.S. stock futures fell on Wednesday after news reports of an explosion in Iran that state television there attributed to a missile fired by an unknown aircraft.

An unknown aircraft fired a missile on Wednesday in a deserted area near Iran's southern port city of Dailam in Bushehr province, where the country has a nuclear power plant, Iranian state television said.

Crude oil futures rose sharply after news of the Iran blast.

The reports raised security concerns among investors in a market that was already nervous before Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites)'s congressional testimony on the economy and interest rates later on Wednesday.

S&P 500 futures slipped 5 points, below fair value accounting for interest rates, dividends and time to expiration on the contract.

Dow Jones industrial index futures were down 33 points, while Nasdaq 100 futures slipped 6 points.

"The tensions have been rising between the U.S. and Iran as of late. This explosion basically sent chills down the spines of futures traders," said Phil Flynn, senior market analyst at Alaron Trading Corp. in Chicago. "Oil prices reacted immediately and rallied up to the highs and this caused a corresponding drop in stock prices."

Crude oil prices rose $1 after news of the Iran blasts and a short time later were up 88 cents at $48.14 a barrel. The U.S. government will report crude oil supplies at 10:30 a.m., with the data expected to show a rise in inventories last week.

Financial markets want to know from Greenspan how far interest rates will rise and how long the measured pace will remain. Greenspan will appear before the Senate Banking Committee at 10 a.m.

"The market needs to digest the news out of Iran," said Harry Michas, stock index futures trader at manmarketmonitor.com. "Stock index futures have recovered a little bit this morning, but traders will keep one eye on Iran and the other eye on Greenspan throughout the trading session. I think Greenspan's testimony should increase the volatility as traders react to his answers regarding the U.S. economy."

In earnings news, soft-drink company Coca-Cola Co. (NYSE:KO - news) reported an increase in fourth-quarter earnings, topping Wall Street's estimates. Coca-Cola's shares were up nearly 2 percent to $43.40 in trading on the Inet electronic brokerage system.

Network Appliance Inc. (Nasdaq:NTAP - news) fell 12 percent to $30.18 a day after the storage equipment maker issued a revenue forecast for the current quarter that was not higher than current analysts' forecasts for growth.

In economic data, U.S. housing starts unexpectedly rose 4.7 percent last month to a nearly 21-year high as single-family housing starts shot up to a record, a Commerce Department (news - web sites) report showed. Wall Street economists had expected housing starts to decrease 4.3 percent to a 1.917 million unit rate from the 2.004 million unit rate initially reported for December. (Additional reporting by Doris Frankel)