US stock futures off as Mideast conflict continues

NEW YORK, July 17 (Reuters) U.S. stock futures fell on Monday, indicating a slightly weaker market opening, as the conflict in the Middle East kept investors on edge and oil prices remained near record highs.

Stock futures rose briefly after a report that Israel's assault on Lebanon could end in days, causing oil prices to drop sharply.

But the report was immediately followed by an Israeli government spokeswoman's statement that Israel has no plans to halt its offensive. For details, see ID:nL17146814.

Investors also focused on the latest earnings news. Citigroup Inc., the world's largest bank by market value, reported a profit in line with analysts' estimates. ID:nN17267448.

''Any notion or strong sign of a cease-fire is going to allow the market to breathe a sigh of relief. The market's been under tremendous pressure,'' said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey. ''Right now earnings are taking a back seat to geopolitical concerns surrounding us.'' Standard&Poor's 500 futures were down 2.9 points, below fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures were down 20 points, and Nasdaq 100 futures were down 4.25 points.

On Friday, U.S. stocks dropped for the third straight day as rapidly escalating violence in the Middle East drove oil prices to a record high.

The Dow Jones industrial average was down 106.94 points, or 0.99 percent, to end at 10,739.35. The Standard&Poor's 500 Index .SPX> was down 6.09 points, or 0.49 percent, to finish at 1,236.20.

The Nasdaq Composite Index .IXIC> was down 16.76 points, or 0.82 percent, to close at 2,037.35. For the Dow and the Nasdaq, it was the worst three-day decline since April 2005 when worries about a soft patch in the U.S. economy and anti-Japan protests in China hit stocks.

U.S. light sweet crude for August delivery CLc1> was trading down 78 cents at .25 a barrel. Prices soared on Friday to a record of .40.

Citigroup's earnings began a week that will include a number of other major company results, including Web search company Yahoo Inc., which will report after Monday's closing bell.

''The market is looking to hang its hat on some positive news. It appears Citigroup on the surface didn't come through,'' Bakhos said.

In merger news, Phelps Dodge Corp. raised its bid for Inco Ltd.

on Sunday and Inco raised its offer for Falconbridge Ltd.

The companies are battling to protect their proposed billion three-way merger and create the biggest mining group in North America.

On the economic front, the Federal Reserve releases industrial production and capacity utilization data for June at 9:15 a.m. (1315 GMT). Economists in a Reuters survey expect a median rise of 0.4 percent in production versus a fall of 0.1 percent in May. Capacity utilization is expected to be 81.9 percent compared with 81.7 percent in May.

REUTERS CS RN1739