U.S. Stocks To Open Higher After Inflation Report

NEW YORK (MarketWatch) -- U.S. stocks were set for a higher open Tuesday, after weaker-than-expected consumer price inflation in April boosted hopes that the Federal Reserve will be able to cut interest rates to boost a slowing economy, offset disappointing results from Home Depot Inc. and Wal-Mart Stores Inc.

Futures for the Dow Jones Industrial Average were up 14 points at 13,402, while those for the S&P 500 index gained 1.80 points to 1,510.

Nasdaq 100 futures added 1.7 points to 1,898.

Among blue chips, Home Depot lost 2.3% in electronic trade. It posted a 30% first-quarter profit decline -- coming in below expectations -- and said annual earnings would be at the low end of guidance. Home Depot blamed a challenging housing market and erratic weather.

Wal-Mart Stores rebounded from early weakness. It recently traded up 0.3% before the open. The retail giant's first-quarter earnings met lowered forecasts but its second-quarter outlook came at the lower end of Wall Street expectations.

American International Group agreed to pay $813 million, or $22 a share, for the roughly 40% it doesn't already own in 21st Century Insurance Group .

Among tech shares, Agilent Technologies jumped 3% before the open after its current quarter earnings per share and revenue outlook topped analyst estimates.

Inflation

Stock futures reversed early weakness after news that the consumer price index rose 0.4% in April, below the 0.5% expected by Wall Street economists.

Excluding food and energy prices, the so-called core CPI rose 0.2%, in line with expectations, and cutting the annual gain in the core down to a one-year low of 2.3%.

Meanwhile, news that conditions for New York area manufacturers improved slightly in May, in line with expectations, had little immediate impact on trade.

Other markets

The dollar fell slightly against major rivals after the CPI data.

Treasury bonds advanced, with the benchmark 10-year Treasury bond up 5/32 at 98 19/32 in price, while its yield, which moves inversely, fell to 4.680%.

Oil futures were down 10 cents at $62.36 a barrel. Traders weighed worries about tight U.S. gasoline inventories ahead of tomorrow's data releases, along with concerns over oil supply disruptions in Nigeria.

Gold futures rose $1.70 to $671.80 an ounce.

More deal news

The market continued to be fed with more deal news on Tuesday.

On Monday, the Dow industrials gained while the rest of the market struggled. News that DaimlerChrysler AG agreed to sell 80% of Chrysler to a private equity firm had helped buoy the auto sector, including rivals General Motors Corp. and Ford Motor Co. .

On Tuesday, Reuters backed a $17.2 billion offer from Thomson Corp. that valued the financial news and data provider at $82.23 per share. Importantly, a foundation designed to preserve Reuters news integrity which holds blocking power opted to back the deal as well.

Germany's HeidelbergCement agreed to buy Britain's Hanson in a $15.8 billion deal in the building materials business.

Beckman Coulter won't lift its $90-a-share bid for Biosite , which has backed a $92.50 a share offer from Inverness Medical . Biosite closed at $94.66, indicating some in the market expected Beckman to top Inverness' bid.

By Nick Godt