Futures slip before CPI; bank worry lingers

Stock futures slipped on Wednesday due to caution ahead of a key inflation report and mounting concerns about the health of the financial sector.
The government is scheduled to release June's Consumer Price Index at 8:30 a.m., a day after Federal Reserve Chairman Ben Bernanke flagged inflation as one of the threats menacing the U.S. economy during testimony before the U.S. Senate Banking Committee. The bank sector is again set to hold sway over the market after Bloomberg News reported that U.S. securities regulators had subpoenaed securities firms including Deutsche Bank, Goldman Sachs and Merrill Lynch to probe suspected manipulation of Lehman Brothers and Bear Stearns shares.
Bloomberg cited two people familiar with the matter.
Credit Suisse forecast continued financial woes for mortgage finance giants Freddie Mac and Fannie Mae despite U.S. government efforts to aid the two companies. The brokerage cut its price targets on both stocks.
A broad decline in European stocks following a report that showed a jump in jobless claims in the United Kingdom added to the cautious tone, said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
S&P 500 futures slipped 2.90 points and were below fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.
Dow Jones industrial average futures declined 24 points, and Nasdaq 100 futures shed 4.25 points.
Bernanke, who is due to testify again on the economy before the U.S. House Financial Services Committee, said on Tuesday inflation posed a "significant challenge" for monetary policy-makers.
A drop in crude oil prices could lend support to the market, with U.S. front-month crude down about $2 at $136.75 a barrel, along with chip-maker Intel Corp's stronger-than-expected quarterly profit.
In deal news, mining company Cleveland-Cliffs Inc said it would buy Appalachian coal producer Alpha Natural Resources Inc in a cash-and-stock deal worth about $10 billion.
U.S. stocks ended mixed on Tuesday, with the S&P 500 ower amid declines in bank stocks and the Dow industrials finishing below 11,000 for the first time in two years. The Nasdaq edged up.