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Telecom downgrades push stock futures lower

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Shares of BellSouth (NASDAQ:BLS) $26.39 dropped to $25.50 from $26.29 and SBC Communications (NASDAQ:SBC) $27.05 were offered $1 lower on Instinet following a downgrade from Morgan Stanley.

The broker said it was moving to 'equal-weight' from 'overweight' on SBC, BLS and Verizon (NYSE:VZ) $37.75 "following significant price appreciation." The Bells are up 38 percent since the start of the month versus 9% rise for the S&P 500, which makes the valuations on the stocks less compelling, it told clients.

Shares of drug maker Eli Lilly (NYSE:LLY) $63.00 fell 6% to $59.10 after reporting Q3 earnings that met expectations, but revenue fell short of expectations as sales of Prozac suffered from generic competition. The company lowered its outlook for the year due to the need for continued investment in its drug pipeline.

Banking giant and Dow component Citigroup (NYSE:C) $35.53 fell to $34.61 on Instinet amid a Wall Street Journal report that indicated investigators are honing in on Chief Executive Sandford Weill.

Mr. Weill, in an e-mail to employees overnight made public by the bank, said he has volunteered to testify to the New York State Attorney General and other regulators investigating investment banking and research practices at the bank.

Mr. Weill also said a report in the Wall Street Journal on Wednesday that he has hired his own attorney because his own interests may have diverged from Citigroup contained "outrageous speculation and wild inferences.

Multiple earnings have been released before the opening bell with Dow components DuPont (NYSE:DD) $41.75 beating estimates by 5- cents a share and International Paper (NYSE:IP) $38.10 beating estimates by 1-cent a share.

The world's No. 3 automaker Daimler Chrysler (NYSE:DCX) $37.86 reported EPS of $0.87, which were much better than consensus of $0.76 from Multex and $0.71 from Zacks.

Earnings disappointments were few, with United Rentals (NYSE:URI) $7.40 reporting EPS of $0.43, which was 4-cents shy of Multex consensus for $0.47 and Zacks' consensus of $0.49.

S&P futures (sp02z) are currently lower by 7.3 points at 884.20. NASDAQ futures (nd02z) are off 13.00 points at 960, while Dow futures (dj02z) are down 70 points at 8,375.

Treasury bond futures are higher across the 5, 10 and 30-year maturities this morning, with the 10-year (ty02z) 112'095 +0.22% making gains in the early morning. Technicals to watch here would be the starting to round flat 50-day SMA at 113'293 above. This could be correlated against the 50-day SMA's of the major equity indexes, which are currently BELOW current trading levels.

Fair value for the S&P500 today is $0.32. That price will not change during the session. HL Camp & Company has their computers set for program buying at $2.04 and set for program selling at $-1.39. Fair value for the NASDAQ-100 today is $2.48.

Jeff Bailey

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