US STOCKS-Wall St set to open lower on global bond rout

May 12, 2015 12:17 PM

* AOL shares jump after Verizon deal for $4.4 bln

* 10-yr U.S. Treasury yields at 6-month high

* Futures down: Dow 101 pts, S&P 11 pts, Nasdaq 31.25 pts (Adds details, comment, updates prices)

By Tanya Agrawal

May 12 (Reuters) - Wall Street was set to open lower on Tuesday as a global bond sell-off and concerns over Greece's perilous financial situation weighed on the market.

Ten-year U.S. Treasury yields, the benchmark for global borrowing costs, hit their highest since mid-November. Elevated yields mean higher corporate borrowing costs, which affect shares across the world.

"The bond sell-off is knocking the wind out of equities," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

"With bond yields moving up, this could be the catalyst for the market to correct."

The U.S. stock market has been trading at historically expensive valuations, fueled by ultra-low borrowing costs.

The S&P 500 is trading at 17 times expected earnings, compared with its historical 10-year median average of 15, according to Thomson Reuters StarMine data.

Cardillo said stock futures would have been lower but for the Verizon-AOL deal, which is cushioning some of the fall.

AOL shares jumped 17.8 percent to $50.20 after Verizon Communications said it would buy the company in a $4.4 billion deal, giving it access to AOL's successful digital advertising service. Verizon slipped 0.7 percent to $49.44.

Deals in the technology sector jumped 34 percent to $116.6 billion so far this year, second only to the health sector in terms of value, according to Thomson Reuters data.

Greece's precarious economic situation also weighed on the markets. Euro zone finance ministers, who met on Monday, acknowledged progress in talks between Greece and its creditors but said more work was needed to close a cash-for-reforms deal.

S&P 500 e-mini futures were down 11 points and their fair value - a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract - indicated a lower open.

Dow Jones industrial average e-mini futures fell 101 points, while Nasdaq 100 e-mini futures slipped 31.25 points.

Hilton shares fell 1.8 percent to $29.15 in premarket trading, after Blackstone cut its stake below 50 percent in the hotel operator.

Pall Corp rose 21 percent to $120.25, after the Wall Street Journal reported that the company was in the final stages of an auction for selling itself.

Gap fell 3.4 percent to $38.50 after the company reported comparable sales decline of 4 percent in the first quarter.

YY Inc slumped 7.4 percent to $63.89 after brokerages cut price targets on the video streaming website operator's stock.

Data expected on Tuesday includes U.S. small business confidence numbers at 10 a.m. ET (1400 GMT) and the U.S. Federal budget numbers for April at 2 p.m. (1800 GMT) (Editing by Saumyadeb Chakrabarty)