Europe could trip up Wall Street bulls

Headline risk from Europe could trip up Wall Street`s bulls Wednesday.

As markets looked forward to Wednesday`s European leaders summit, clarification from former Greek Prime Minister Lucas Papademos could also sway sentiment. After the market closed, Papademos told CNBC there are no preparations underway in Greece for possibly exiting the euro, adding that he is not aware of any specific preparations in European institutions or other European countries. US stocks took a hit on an earlier report that Papademos said there`s a real risk Greece could leave the euro. It also pulled down the euro to session a late day report Tuesday quoting former Greek Prime Minister Lucas Papademos totally deflated what was left of a two-day rally in stocks. It also pulled down the euro to session lows. Stocks sank into negative territory, but finished the day with just slight losses. The Dow was down 1 at 12,502, while the SandP was up less than 1 point at 1,316, and the Nasdaq was down 8 at 2,839. Dell could prove to be a weight on the Nasdaq Wednesday after falling nearly 13% after Tuesday`s close on disappointing earnings news. Hewlett-Packard, which reports earnings after Wednesday`s bell, fell more than 2.5% in sympathy in the afterhours market. Dell said its first quarter was mixed and its consumer business was challenged. But it`s the EU leaders meeting investors have been anticipating, and the markets will be hostage to any news from there. However, expectations for any real developments are low. "They may not have the large bullet people are talking about, but we are going to see if they discuss any measures to help growth or maintain that austerity pledge. Germany doesn`t want to be seen financing any budget deficits," said Brian Kim, currency strategist at RBS. There had been some expectations that the group could discuss a new euro bond, after French President Francois Hollande said he would raise the idea over the weekend. But even if discussed, it does not seem likely to be approved. A senior German official, quoted by the AP, said euro bonds are not the right path and can`t be part of a growth strategy. _PAGEBREAK_ What to Watch New home sales and FHFA home price data are reported at 10 am ET. The Treasury auctions USD 32 billion in 5-year notes at 1 pm. Earnings are expected from Toll Brothers, Bank of Montreal, Hormel, Big Lots and American Eagle ahead of the opening bell. Besides Hewlett-Packard, Pandora, NetApp, PVH and Synopsys report after the closing bell. Oil markets will be paying careful attention to the talks in Baghdad between Iran and six nations on Iran`s nuclear program. Government oil inventory data is released at 10:30 am. Losing Face on Facebook Both Nasdaq and Morgan Stanley defended their handling of the Facebook IPO Tuesday, as pressure mounted on both, and Facebook shares continued to slide. The Financial Industry Regulatory Authority plans to review allegations that Morgan Stanley shared negative news before the IPO with institutional investors. Massachusetts meanwhile has issued a subpoena to Morgan Stanley related to the allegations. Morgan Stanley, in a statement, said it did nothing wrong when its analyst, like other analysts at underwriting firms, lowered estimates on Facebook after reading an SEC filing made by the company, days ahead of the offering. Nasdaq, meanwhile, held a call with its customers late in the day. "My intention was to make clear that we believed we had a good solution in place and that if we had known that our solution was inadequate, we would have fixed the issue with the right solution going forward," said Eric Noll, Nasdaq head of transaction services, in a statement. Noll was quoted by the Wall Street Journal as saying Nasdaq has been in talks with Facebook since the IPO and the conversations are ongoing. He also said It`s not clear whether everyone will get "dollar on the dollar," according to the Journal. Some traders say they are still waiting to find out the status of customer orders made early Friday when Nasdaq systems fumbled. Copyright 2011 cnbc.com