MARKET SNAPSHOT: U.S. Stocks: Futures Slide; Verizon To Acquire AOL

By Carla Mozee, MarketWatch

Oil prices advance

U.S. stocks appear set to drop sharply Tuesday as equity futures feeling the weight from a selloff in bond markets.

But AOL Inc. is surging premarket as Verizon Communications Inc. plans to buy the Internet content company for more than $4 billion.

Futures for the Dow Jones Industrial Average (YMM5) dropped 112 points, or 0.6%, to 17,927, and those for the S&P 500 (ESM5) fell 13 points, or 0.6%, to 2,084.50. Nasdaq futures (NQM5) were down 34 points, or 0.8%, at 4,397.75.

A downward move would extend Monday's losses for U.S. stocks (http://www.marketwatch.com/story/us-stocks-futures-dip-as-markets-struggle-to-build-on-post-jobs-gains-2015-05-11). U.S. bond prices may see another fall following the battering European bonds were taking Tuesday. Some analysts have pointed to a rise in inflation expectations in the eurozone as a factor driving bond prices down and yields higher. The widely watched yield on Germany's 10-year Bund (http://www.marketwatch.com/story/german-bond-yields-surge-amid-european-bond-sellof-2015-05-12) leapt above 0.7% Tuesday.

"Wall Street is being pulled around by the sentiment on the bond markets. The latest rise in Treasury yields is adding to pressure on equities. Again with little on the economic calendar today, we could see this continue," said Richard Perry, market analyst at Hantec Markets, in a note.

U.S. bond yields on Monday hit their highest level since early December (http://www.marketwatch.com/story/treasury-prices-decline-as-eurozone-bond-market-resumes-selloff-2015-05-11). The yield on the 10-year Treasury note on Monday climbed to 2.267%, according to Tradeweb.

AOL/Verizon: AOL (AOL) shares jumped 17% in premarket trade after the company agreed to be bought by Verizon (http://www.marketwatch.com/story/aols-stock-soars-after-agreeing-to-be-acquired-by-verizon-2015-05-12)(VZ) in a deal valued at $4.4 billion. Verizon expects to fund the purchase with cash on hand and commercial paper. Verizon's stock fell 1.6% in premarket trade.

Data: Economic reports on Tuesday's docket include the 9 a.m. Eastern Time release of a small-business optimism index by the National Federation of Independent Business. At 10 a.m., the Labor Department is set to release figures on March job openings.

The Federal Reserve's report on first-quarter household debt and credit is slated for release at 11 a.m. Eastern.

Federal Reserve member John Williams will give his assessment about the prospects for the U.S. economy at a 12:45 p.m. speech at the NY Association for Business Economics in New York. In a CNBC interview Monday, Williams said the first quarter wasn't as weak as it appears (http://www.marketwatch.com/story/feds-williams-finds-a-reason-to-be-cheerful-about-first-quarter-2015-05-11).

Stocks to watch: Online real-estate services firm Zillow Group Inc. (ZILLOW.XX) is forecast to report a first-quarter loss of 12 cents a share after the bell, according to a FactSet consensus estimate.

Drug distribution company McKesson Corp. (MCK) is expected to post fiscal-fourth-quarter profit of $2.74 a share.

Gap Inc. (GPS) dropped more than 2% Monday evening after the clothing retailer's first-quarter revenue missed FactSet analysts' estimates.

Other markets: Oil futures (CLM5) shot higher and gold prices (GCM5) advanced as the U.S. dollar (DXY) fell.

In Europe, the Stoxx 600 stumbled 1.5%. Greece worries intensified after the country's finance minister said it may run out of cash in two weeks. In Asia, the Shanghai Composite fell 1.1%, but Japan's Nikkei Average edged up about 4 points.

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