U.S. Stocks To Open Higher After Inflation Data
NEW YORK (MarketWatch) -- U.S. stocks were set for a higher open on Friday, after news of tame core March producer prices fueled hopes that inflation remains under control and might allow the Federal Reserve to cut interest rates to boost the economy.
Upbeat earnings and forecasts from blue chips General Electric Co. , Merck & Co Inc. , and McDonald's Corp. also helped boost sentiment.
Futures for the Dow Jones Industrial Average were up 27 points at 12,631, while those for the S&P 500 index advanced 1.9 points to 1,457.
Nasdaq 100 futures rose 0.5 points to 1,827.
Stock futures reversed an early negative bias after the release of the March producer price index. While higher prices for food and energy pushed up the headline PPI by 1% last month, core prices were unchanged.
Economists polled by MarketWatch expected the headline PPI to rise 0.8% and the core PPI to rise 0.2%.
Investors have been scaling back expectations that the Fed would soon cut interest rates after minutes from the central bank's last meeting revealed continued concern about inflation.
But with Fed policy orientation also dependent on incoming data, the PPI will rekindle some hope that the Fed has enough leg room to cut rates if needed.
But "Federal Reserve policymakers face a difficult challenge accomplishing both moderate inflation and growth," said Peter Morici, economics professor with the Robert H. Smith School of Business at the University of Maryland, in a note.
"Confronting a Hobson choice of pushing the economy into recession or setting off an inflation spiral, the best policy course will be to do no harm, and leave the economy to its natural dynamics," he said.
Upbeat earnings, forecasts
In spite of overall gloomy expectations for the first-quarter earnings season, several blue chips came up with upbeat news on Friday.
General Electric Co. rose 1% before the open after the bellwether's first-quarter results came in line with analysts expectations. GE also reaffirmed its earnings guidance for 2007.
Merck & Co. rose 4.3% after lifting its profit forecast for the year, citing "strong performance" across its product lines. Goldman Sachs upgraded Merck to neutral from sell on the back of its raised forecasts, and said the drug company has handled issues over the expiry of patents better than some of its rivals.
McDonald's Corp. said worldwide same-store sales rose 8.2% and said it expects first-quarter earnings of 62 cents, including a 1-cent gain from foreign currency translation. Analysts polled by Thomson Financial on average expect first-quarter earnings of 57 cents per share. Analysts' estimates usually exclude items.
Elsewhere, Apple Inc. dropped 1.3% before the open after saying it would delay the release of Leopard, the next upgrade of its Mac operating system, until October.
U.S. shares closed higher Thursday, bouncing back from the previous session's sell-off as investors looked past disappointing outlooks from some retailers in a search for bargains.
The dollar weakened against the European and Japanese currencies as traders adjusted their positions ahead of a Group of Seven meeting, with the greenback losing 0.6% against the yen to stand at 118.28 yen.
Oil, meanwhile, strengthened slightly, adding to Thursday's sharp gains on the back of an International Energy Agency report that world oil output fell in March. The May-dated light crude contract climbed 12 cents at $63.97 a barrel in electronic trading.
Among oil majors, BP shares gained 2.3%, with Royal Dutch Shell adding 1.8%.
Also Thursday, Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. said the Justice Department has requested more information on their planned merger.
Shares in the two could also get a lift from CBS Corp.'s announcement that it's canceled Don Imus' show in the wake of the talk show host's racally-charged remarks about the Rutgers University women's basketball team.
By Nick Godt