US STOCKS-Futures edge lower after Greek elections

* Instability worries follow Greek election outcome

* Rock-Tenn and MeadWestvaco to merge

* Dow down 35 pts, S&P down 2.75 pts, Nasdaq up 0.5 pt (Updates trading, adds Ocwen Financial news)

By Ryan Vlastelica

NEW YORK, Jan 26 (Reuters) – Dow Futures dipped on Monday after a victory by the leftist Syriza party in Greece raised concerns about new instability in the euro zone.

The party looked set to take on Greece’s international lenders, with leader Alexis Tsipras pledging to end five years of austerity and renegotiate Greece’s debt agreements. Investors were concerned that potential conflicts with other euro zone governments could put more strain on the currency bloc.

European shares were volatile after the election, falling as much as 0.4 percent before rising by 0.5 percent. They last traded up 0.2 percent. U.S.-listed shares of the National Bank of Greece fell 6.5 percent to $ 1.57 in premarket trading.

Last week’s larger-than-expected stimulus program announced by the European Central Bank could offset some concerns over Greece. Hopes that a compromise could be reached between Athens and its lenders, keeping Greece in the euro, may also support sentiment.

While Greece is a relatively small economy that the United States has limited direct exposure to, extended volatility in the region could hurt multinational companies. Separately, if the euro continues to weaken against the dollar, that could be a headwind for earnings.

The German government said a third debt restructuring was out of the question for Greece, though it opened the door to a possible extension of the country’s current bailout program.

In deal news, Rock-Tenn Co and MeadWestvaco Corp said they would combine to form a company worth $ 16 billion, with MeadWestvaco shareholders owning a majority stake. AT&T Inc agreed to buy Nextel Mexico for $ 1.88 billion.

Ocwen Financial Corp jumped after the company paid $ 2.5 million in penalties to the California Department of Business Oversight, which had threatened to suspend Ocwen’s license to operate in the state. About 460,000 shares exchanged hands, making the stock the New York Stock Exchange’s most active premarket mover.

Investors await some key earnings reports, including those of Microsoft Corp and Texas Instruments Inc. With 18 percent of S&P 500 companies having reported, 72.2 percent have topped earnings expectations, while 54.4 percent have beaten revenue forecasts, according to Thomson Reuters data. That compares with the long-term average of 63 percent for earnings and 61 percent for revenue.

Futures snapshot at 7:49 a.m.:

* S&P 500 e-minis were down 2.75 points, or 0.13 percent, with 162,301 contracts changing hands.

* Nasdaq 100 e-minis were up 0.5 points, or 0.01 percent, in volume of 25,538 contracts.

* Dow e-minis were down 35 points, or 0.2 percent, with 27,190 contracts changing hands.

(Editing by Bernadette Baum)