Stocks were indicated to open higher Monday as major index futures rose in premarket trading. Earnings reports were likely to dominate activity in the session. Investors were also weighing deal news involving two high-profile companies -- Ford Motor (F) and Wrigley (WWY), as well as the latest developments in the Yahoo (YHOO)-Microsoft (MSFT) saga.
Market watchers were expecting the Federal Reserve to signal that it is close to the end of its credit easing cycle at its policy meeting on Wednesday. Bond yields have risen the past week on the growing perception the current economic slowdown will level off in second half.
The dollar index was down. Gold futures and oil futures were higher.
On Friday, the Dow Jones industrial average rose 42.91 points, or 0.33%, to 12,891.86. And the broader S&P 500 was up 9.02 points, or 0.65%, to 1,397.84. But the tech-heavy Nasdaq composite index fell 5.99 points, or 0.25%, to 2,422.93.
The market's tone has improved in recent days. "A few months ago many feared the credit crunch would put an end to the financial system as we know it, and knock the world into recession. But those fears have not been borne out," writes Action Economics economist Kim Rupert. "Indeed, it now looks as though it's Fed rate cuts that are nearing an end, while there's increased optimism that the dollar and stocks have hit bottom."
"In our opinion, the combination of some extension of the advances for uptrending cyclically sensitive issues and rebounding previously out-of-favor financials and consumer discretionary stocks should buoy the averages," writes Miller Tabak strategist Phil Roth.
There were no significant economic reports scheduled for release Monday. Friday's nonfarm payroll report for April is expected to show a 50,000 decrease. The advance fist-quarter gross domestic product report on Wednesday will likely post a 0.5% rise, helped by inventory strength. A much weaker than expected figure could increase recession concerns and the likelihood of further Fed cuts.
Energy futures were mixed, well down from earlier highs, following reports workers at Ineos' Grangemouth oil refinery in Scotland will return to work Tuesday after a two-day strike that forced the closure of BP's (BP) Kinneil oil processing facility over the weekend, cutting off almost half of the UK's oil production. The market is still being influenced by reports Nigerian rebels killed five policemen in Sunday's attack in the Niger Delta, where output has dropped by 50% since April 25, which is adding to concern about supplies before the Northern Hemisphere summer driving season.
June WTI crude oil futures, which hit a $119.95 per barrel high earlier Monday, were up 28 cents to $118.80.
A Reuters dispatch says OPEC President Chakib Khelil does not rule out oil prices reaching $200 a barrel, even though supply is adequate, because the market is driven by the dollar's slide, Algerian government newspaper El Moudjahid reported.
Among Monday's stocks in the news, Tracinda Corp., controlled by billionaire investor Kirk Kerkorian, says it intends to make a cash tender offer for up to 20 million shares of Ford at a price of $8.50 per share. Upon completion of the bid, Tracinda would beneficially own 120 million Ford shares, or about 5.6% of the outstanding shares.
According to a Wall Street Journal report, privately held candy giant Mars Inc. and Berkshire Hathaway (BRKA) were near a pact to acquire Wrigley for more than $22 billion.
Over the weekend, Microsoft's $42.7 billion acquisition offer for Yahoo expired, with Yahoo declining to agree to a deal. Now, the Wall Street Journal reports that Microsoft's chief Steve Ballmer is facing one of the biggest decisions of his career: Walk away from the proposed acquisition or launch the largest hostile takeover battle in tech-industry history.
Merck (MRK) and Schering-Plough (SGP) confirmed that they received a not-approvable letter from the FDA for a proposed fixed combination of loratadine and montelukast for the treatment of allergic rhinitis symptoms in patients who want relief from nasal congestion.
In a message to employees, Continental Airlines (CAL) CEO Larry Kellner and president Jeff Smisek said that the company's board of directors met and has unanimously supported management's recommendation that, in the current industry environment, the best course for Continental is to not merge with another airline at this time. Late Friday, it was announced that Continental was in advanced merger talks with United Airlines, a unit of UAL Corp. (UAUA).
Verizon Communications (VZ) posted first-quarter non-GAAP earnings per share of 61 cents, vs. 54 cents one year earlier, on a 5.5% revenue rise.
Treasury market
Bonds were mixed Monday morning, drifting in anticipation the Fed will signal it is close to the end of its credit easing cycle on Wednesday, Yields have risen and prices have fallen for the past week on the growing perception the current economic slowdown will level off in the second half of the year. The 2-year Treasury note was up 01/32 to 99-28/32 for a yield of 2.407%, the 10-year Treasury was off 05/32 to 96-29/32 for a yield of 3.892%, and the 30-year bond was off 14/32 to 96 for a yield of 4.627%.