US STOCKS-Wall St set to open down on France downgrade, HP charge

Last Updated: Tue, Nov 20, 2012 14:20 hrs

* Moody's cuts France credit rating

* Hewlett-Packard tumbles after charge

* Housing starts rise to highest rate in over four years

* Futures: Dow off 10 pts, S&P off 0.2 pt, up Nasdaq 6 pts

By Chuck Mikolajczak

NEW YORK, Nov 20 (Reuters) - U.S. stocks were set for a slightly lower open on Tuesday as a credit downgrade of France by ratings agency Moody's and weak earnings by Hewlett-Packard gave investors reasons to pause after a two-day rally.

The benchmark S&P index had risen more than 2 percent in the previous two sessions, its best two-day run in nearly four months, on optimism a deal could be reached to stave off the looming U.S. "fiscal cliff," a series of tax and spending changes next year that could derail the economic recovery.

Moody's Investors Service cut France's sovereign rating by one notch to Aa1 after the market's close on Monday, citing an uncertain fiscal outlook as a result of the weakening economy.

While the move was expected after Standard & Poor's issued a similar downgrade in January, the Moody's decision was a reminder of the headwinds buffeting the global economy and the danger of contagion by the euro zone's debt crisis.

"The market is going to go up and down based on rhetoric coming out of Washington," said Steven Roge, portfolio manager at RW Roge & Co in Beverly, Massachusetts.

"Because the delta of outcomes is so gigantic - you could have us go off the fiscal cliff, Europe blow up or fiscal cliff gets passed, growth resumes, Europe grows its way out of the debt crisis - we are just waiting for direction and the fiscal cliff is that first piece of information."

Hewlett-Packard Co slumped 10.2 percent to $11.95 in premarket trade after the company took an $8.8 billion charge related to its acquisition of software firm Autonomy, citing "serious accounting improprieties," as it swung to a fourth-quarter loss.

U.S. housing starts rose to their highest rate in more than four years in October, suggesting the housing market recovery was gaining steam.

Best Buy Co Inc dropped 5.7 percent to $12.97 after the world's largest consumer electronics chain reported a weaker-than-expected profit and its ninth same-store sales decline in 10 quarters.

Also in the euro zone, finance ministers will give a tentative go-ahead for the disbursement of 44 billion euros in emergency loans to Greece on Tuesday, but the money will only be paid on Dec. 5 if the country meets all remaining conditions.

S&P 500 futures slipped 0.2 points and were slightly 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 lost 10 points, and Nasdaq 100 futures added 6 points.

The S&P 500 index had fallen 5.3 percent between election day and the start of the rebound as angst over a possible deal drove investors to sell stocks limit the impact tax of expected tax increases on capital gains and dividends.

President Barack Obama and congressional leaders hope to start serious negotiations after the Thanksgiving holiday on Thursday on avoiding the "fiscal cliff."

At 12:15 p.m (1715 GMT), Federal Reserve Chairman Ben Bernanke speaks before the Economic Club of New York, a speech that may offer clues about the Fed's intentions on more monetary stimulus. Market participants currently expect the Fed to step up asset purchases in 2013 after Operation Twist expires.

H.J. Heinz Co lost 1.7 percent to $57.70 and Campbell Soup Co shed 1.8 percent to $36.27 in premarket trade after both companies reported quarterly earnings.

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