Futures down after strong week, ahead of Alcoa

NEW YORK (Reuters) - U.S. stock index futures were down on Monday, following the S&P's best week in a year and as investors awaited the unofficial start of earnings season with ALCOA (AA.NY)Inc's results later in the day.

Investors also remained concerned about Europe's fiscal issues and financial sector ahead of the "stress tests" put on the continent's banks. Over the weekend, a German magazine reported that the test included a haircut on German sovereign debt under certain conditions in its worst scenario.

While Alcoa, the first Dow component to report earnings, is expected to swing to a profit in its second quarter, analysts have been cutting their estimates for the firm due to falling aluminum prices. The results will be released after the market closes.

"The focus is on Alcoa and earnings, and there's a little bit of anxiety, especially since we're coming off of such a strong week," said Peter Cardillo, chief market analyst at Avalon Partners in New York.

"The European tests and prospects for financial regulation here are also weighing on things a bit."

Wall Street closed out its best week in a year on Friday, snapping back from a long stretch of selling, as investors looked ahead to what many expect will be a solid earnings season.

For the second quarter, analysts see earnings growth of 27 percent for companies in the S&P 500, according to Thomson Reuters data, up from previous readings in the past three quarters, which hovered around 22 percent. This would also be higher than the 22.4 percent analysts were predicting at the beginning of the year.

August crude futures fell 0.5 percent to $75.68 per barrel after gaining more than 5 percent last week, as traders locked in profits ahead of earnings season and fresh U.S. economic data.

In deal news, Aon Corp agreed to buy Hewitt Associates Inc for $4.9 billion in cash and stock while Staples Inc will complete a proposed deal to buy Corporate Express Australia .

S&P 500 futures fell 4 points and were 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 fell 42 points, and Nasdaq 100 futures lost 5 points.

On Saturday, Dow component Johnson & Johnson , which was recently forced to recall children's Tylenol and other over-the-counter pediatric medicines, was sued in a federal court in Chicago by consumers unhappy with the company's plan to offer coupons or replacement products to those who bought the affected drugs.

U.S.-listed shares of BP Plc rose 3.1 percent to $35.10 in premarket trading a day after sources said the company was in talks with Apache Corp and other companies over potential asset sales.

Chinese data over the weekend showing the country's copper demand dropped sent Freeport McMoRan Copper & Gold Inc down 1.2 percent to $65.22 before the bell.

Japan's Nikkei average <.N225> inched lower on Monday while European stocks dipped in morning trade following stellar gains last week ahead of the start of the earnings season.

(Editing by Chizu Nomiyama)

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