U.S. Stocks To Attempt A Rebound At Opening; GM In Focus
NEW YORK (MarketWatch) - U.S. stocks are set to move a touch higher at Monday's opening, bolstered by an upgrade for General Motors, although the advance is likely to be modest in the wake of Friday's sizable selloff and continuing worries about shaky credit.
The futures contract for the Dow Jones Industrial Average last was up just 4 points at 13,510.
The futures contracts for the S&P 500 and the Nasdaq 100 were off 0.5 point at 1,520 and up 3 points at 1,951.
U.S. stocks took a heavy hit on Friday due to nervousness about rising Treasury yields and global rates and subprime lending woes. The Dow industrials dropped 185 points, the S&P 500 fell 19 points and the Nasdaq Composite slipped 28 points.
Investors are prepared to snap up stocks that fell to attractively cheap levels during the recent rout at Monday's opening, but worries about deterioration in the credit sphere will not be far from their minds.
"We appear to be looking in a 'glass half full' way at what caused the market to go down 2% last week," said Art Hogan, chief market strategist at Jefferies & Co.
"Equities are trying to adjust to higher yields," he said, referring to the fact that earlier in the month the yield on the 10-year Treaury note was driven above the 5.25% fed funds rate, signaling expectations of higher rates.
"The stock market is trying to learn whether this points to growth or inflation," Hogan said. "If it is being driven by growth then it is not a negative thing for stocks."
However, the Bank for International Settlements is warning that years of loose monetary policy have fuelled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump is than generally understood, the U.K.'s Telegraph newspaper reported on its website Monday.
The bank, the ultimate bank of central bankers, pointed to a confluence a worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system.
Last week the equities market was freighted by near collapses of two Bear Stearns Cos. hedge funds.
The slumping housing sector also has been a worry to the market. At 10 a.m. investors will view existing home sales figures for May. The MarketWatch forecast, based on a poll of economists, is for 5.90 million home sales last month, which would be down a bit from 5.99 million in April.
Shares on the move
General Motors Corp. last was 3% higher at $36.55 in premaket electronic trade. The auto maker was upgraded to buy from neutral at Goldman Sachs, which said it was making a "tactical trading call," that shares will rise on expectations of sizeable concessions from union talks.
Dow Jones & Co. , the publisher of this report remains in focus. According to the Wall Street Journal online edition, also owned by Dow Jones, there were "intense" over protections over the editorial independence of The Wall Street Journal, the Journal reported, citing people familiar with the matter. Dow Jones also owns MarketWatch, which publishes this report. Dow Jones stock was up 1.3% at $59.55, below the $60 a share bid price.
Drugstore and personal products chain Walgreen's reported a 20% increase in profit, citing strong prescription drug sales. The stock was up 1.6% at $45.69 before the opening.
Other markets
The 10-year Treasury note last was up 5/32 at 95-10/32 with a yield of 5.105%. The bond market could be quiet until the Federal Reserve meeting on interest rates on Wednesday and Thursday.
The Fed is widely expected to leave rates on hold, but investors will be eager to see if the committee's accompanying statement hints at whether rate increases or reductions could be in store in coming months.
The yen remained under pressure, although there is growing talk of a pssibility that the Bank of Japan may lift rates in the near future. The dollar last was off 0.2% at 123.61 yen, as the euro fell 0.04% to $1.3461.
Commodities were backing lower in the early going, with the front-month oil contract off $1 at $68.14 a barrel and the August gold contract down $3.70 at $653.30 an ounce.
By Leslie Wines