U.S. stocks were set to fall at the open on Friday as market uncertainty over Egypt grew amid risks of spreading unrest in the Middle East and higher oil prices.

Protesters insisted Egyptian President Hosni Mubarak step down. The increasingly tense situation raised fears of violence in the most populous Arab nation, a key U.S. ally in an oil-producing region. Al Arabiya television said Mubarak and his family had left Cairo but did not give a source.

The market is worried about the situation turning violent and impacting oil prices, said Peter Cardillo, chief market economist at Avalon Partners in New York.

Egypt has been a friend to the U.S. and if (Mubarak) goes, will we get a friend or an enemy? That's what the market is fearing.

Domestically, the Obama administration declared the public-private housing finance model in place for the past four decades was dead but pledged to continue backing existing obligations of Fannie Mae and Freddie Mac .

Shares of mortgage insurers rose, with PMI Group

up 4 percent to $3.38 and Radian Group up 3.8 percent to $7.35.

The S&P 500, which closed at 1,321.87 Thursday, has technical support at 1,313 and 1,300 -- meaning a drop to those levels could entice buyers.

S&P 500 futures fell 3.6 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 dropped 31 points and Nasdaq 100 futures lost 3.75 points.

Brent oil prices rose 0.8 percent to trade near $102 a barrel on fears oil flows could be disrupted.

Energy sector companies were the most likely to be volatile, and a spike in oil prices could also hurt consumer sector stocks.

Expedia Inc , the largest online travel agency, posted Thursday a quarterly profit on stronger bookings, but the results were weaker than expected and its shares tumbled 14.4 percent to $21.98 premarket.

Nokia and Microsoft teamed up in an attempt to take on Google and Apple in the fast-growing smartphone market. U.S.-traded Nokia shares dropped 9.9 percent to $9.80 in premarket trading and Microsoft added 1.2 percent to $27.83.

The Thomson Reuters/University of Michigan consumer sentiment data is due out at 9:55 a.m.

(Reporting by Rodrigo Campos, additional reporting by Angela Moon; Editing by Kenneth Barry)

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