Stocks To Open Mixed On Deal News, After Rally

NEW YORK (MarketWatch) -- U.S. stocks were poised for a mixed open Monday, as investors consolidate some of Friday's strong gains, while news that DaimlerChrysler AG agreed to sell 80% of Chrysler for $7.45 billion - and other deals - might provide support.

Futures for the Dow Jones Industrial Average were up 13 points at 13,392, while those for the S&P 500 index dropped 0.2 points to 1,512.

Nasdaq 100 futures rose 2.0 points to 1,912.

Among blue-chips, Johnson & Johnson rose 1.2% before the open. A court late Friday ruled that Teva Pharmaceutical and Dr. Reddy's Laboratories infringed on a patent for Aciphex, an anti-ulcer drug co-marketed by Johnson & Johnson.

Wal-Mart Stores Inc. and Home Depot Inc. will also be in focus ahead of reporting earnings Tuesday.

Big three deal

The distressed auto sector should see a boost from the Chrysler deal, although it was widely expected.

Shares of parent DaimlerChrysler climbed 3.7% before the open. The German automaker agreed to sell 80% of its U.S. unit -- while getting rid of its pension liabilities -- to Cerberus Capital Management, in return for an injection of $7.45 billion cash.

Among Dow components, General Motors shares rose 2.1%, while Ford Motor Co. gained 3.6%. Ford's founding family is reportedly considering selling a controlling stake, according to a report from Bloomberg News.

The news on Chrysler also could affect Magna International , which was one of the last bidder.

Running out of steam?

Some consolidation of Friday's gains is expected could affect trade, at least in the early part of the session.

The market rallied on Friday - with the Dow industrials gaining 110 points - after wholesale inflation and weak retail sales boosted hopes the Federal Reserve will eventually cut interest rates to boost a slowing economy.

Stocks have also rallied impressively since mid-March. But there are signs that the market may be running out of steam, according to Marc Pado, market strategist at Cantor Fitzgerald.

"This should be the start of the summer doldrums," he said. "It usually takes the entire month of May to see the trend established, but the market appears poised to start a small top and then the much-anticipated pullback."

Liquidity vs economy

The market has rallied impressively since mid-March, even amid slowing economic and earnings growth. Professional investors credit an impressive amount of global liquidity which continues to power stock prices through corporate share buy-backs, dividends, private equity buy-outs and mergers.

"The continued increase in stocks is flying in the face of a decidedly weakening economy," said Paul Nolte, director of investments at Hinsdale Associates.

"The flipside to the economic numbers has been the huge amount of merger news," Nolte said in a note. "Everyone is combing their favorite screens to ferret out the next possible takeover candidate."

In other deal news, Mylan Laboratories fell 2.2% before the open as it beat out Teva Pharmaceutical, paying $6.7 billion for the generic drug-making arm of Merck KGaA.

And Cardinal Health said it would pay $42.75 a share, or $1.5 billion, for Viasys Healthcare , a 35% premium to Friday's close.

By Nick Godt