Wall Street to open lower on Fed, China worry

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks were set for a lower open on Monday, following the worst weekly decline for the S&P 500 in two months, on concerns the U.S. Federal Reserve's stimulus may be drawing to a close and a cash crunch in China could further slow growth.

Banking shares in China tumbled to their biggest daily loss in almost four years after the People's Bank of China said banks needed to do a better job of managing their cash and lending as the central bank attempts to move the world's second largest economy away from credit-driven investment.

 

The S&P 500 has fallen 2.3 percent in June, putting the benchmark S&P index on track for its worst monthly performance since May 2012. The index is down 4.6 percent from its all-time closing high on May 21.

Concerns the Fed may be planning to reduce its stimulus pushed up yields on 10-year Treasuries to 2.6 percent, its highest level since August 2011.

"We are starting to see that follow-through in Asia, which is all part of the broader narrative - the focus on a lack of stimulus, a creeping higher in rates and the potential impact for less liquidity globally," said Peter Kenny, chief market strategist at Knight Capital in Jersey City, New Jersey.

"This underscores the power and the importance of Fed policy to global central banking."

S&P 500 futures lost 11.6 points and were well 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 declined 108 points, and Nasdaq 100 futures dropped 13 points.

U.S. hospital operator Tenet Healthcare Corp will buy smaller rival Vanguard Health Systems Inc for $4.3 billion or $21 per share including debt to expand into new geographies. Vanguard shares jumped 67.8 percent to $20.76 and Tenet gained 5.7 percent to $44.25 in premarket trade.

Rising interest rates served to dent gold prices, weighing on mining stocks, while other commodities were also pressured by strength in the dollar.

Barrick Gold Corp will lay off up to a third of its corporate staff at its Toronto headquarters and other offices, sources said, as the world's top bullion producer intensifies downsizing amid a slump in the price of gold. U.S.-listed shares dipped 1.4 percent to $16.66 in premarket trade.

Freeport McMoRan Copper and Gold Inc has restarted some operations at the world's second-biggest copper mine after receiving approval from the Indonesian government. Freeport shares shed 1.9 percent to $27.63 in premarket.

Keynote Systems Inc said it had agreed to be acquired by an affiliate of private equity firm Thoma Bravo LLC for about $395 million, or $20 per share. Keynote shares surged 47.5 percent to $19.93 before the opening bell.

STEC Inc jumped 88 percent to $6.75 in premarket after Western Digital Corp said it would buy the company for about $340 million in cash.

(Reporting by Chuck Mikolajczak; Editing by Chizu Nomiyama and Nick Zieminski)