U.S. Stocks To Open Higher On Earnnigs, LBO Momentum
NEW YORK (MarketWatch) - U.S. stocks are headed for a higher opening Monday, lifted by a $25 billion leveraged buyout of educational lender Sallie Mae and positive reaction to earnings from Citigroup, Eli Lilly and others.
In other merger news, Quest Diagnostics has agreed to buy Ameripath for $2 billion in cash.
The futures contract for the Dow Jones Industrial Average last was up 37 points at 12,710.
Futures contracts for the S&P 500 and the Nasdaq 100 were up 5.40 points at 1,466.70 and 7.2 points higher at 1,839.
On Friday stocks posted gains on the day and week, benefiting from upbeat earnings and forecasts from blue-chip stocks, including Merck & Co., General Electric Co. and McDonald's Corp.
The positive momentum should extend into Monday's session, as investors find encouragement in the latest batch of earnings reports and merger announcements. However, a strategist warned that investors should keep other factors in mind as well.
"Once the initial dust settles, investors will have to keep an eye on oil and interest rates. Those are two bearish pulls on the market," said Marc Pado, U.S. market strategist at Cantor Ftizgerald.
"While they are not on the front burner at the moment, they are simmering in the background," Pado said. "If one or the other begins to boil over, it will be a negative distraction for investors. Today, we're looking for some consolidation with an upward bias to start."
The Commerce Department reported that retail sales rose 0.7% in March, led by higher spending on clothing, gas and building materials. The result marked the fastest increase since December's 1.1% gain but was due largely to higher prices, not higher volumes.
Retail sales were slightly stronger than the 0.6% expected by economists surveyed by MarketWatch. Excluding autos, retail sales rose 0.8%, slightly lower than a 1% expected gain.
Manufacturing activity in the New York area rebounded marginally in April, the New York Federal Reserve Bank said. The bank's Empire State Manufacturing index inched higher to 3.8 in April from 1.9 in March.
The index had fallen 22 points in March and economists were expecting more of a rebound to 7.6.
There's more data on the way. The business-inventories report for February is due at 10 a.m. Eastern. The MarketWatch forecast, based on a survey of economists, is for a gain of 0.3%, which would mark an increase from a 0.2% rise in January.
Stocks on the move
Sallie Mae parent, SLM Corp., rose 19% to $55.72 before the opening. The lender will be acquired by an investor group led by J.C. Flowers & Co. for roughly $25 billion, or $60 a share. Shares of the educational financing provider finished Friday at $46.76, up 15%, following initial reports of a potential buyout.
After the deal closes, the company will remain subject to oversight by Congress and the Department of Education.
Quest Diagnostics Inc. fell 0.1% to $54.21 in premarket electronic trade. It is buying closely held AmeriPath Inc., which provides diagnostic services.
Citigroup stock rose 0.8% to $52 before the bell. The Dow component reported first-quarter profit down 11%, but the decline was linked to restructuring costs.
On an operating basis, excluding special charges, Citigroup's net income was $5.88 billion, or $1.18 a share. Analysts polled by Thomson First Call had expected the company to earn $1.09 a share.
Elsewhere in the Dow, Procter & Gamble increased its quarterly dividend by 13%. That stock rose 0.2% to $63.52 before the opening.
Eli Lilly jumped up 2.8% to $58.45 in premarket action. The pharmaceutical company reported a drop in first-quarter profit amid acquisition-related charges and costs from a settlement of product-liability litigation, though sales rose 14%.
Wachovia Corp. stock rose almost 2% to $55.05. During the most recent quarte, net income rose to $2.3 billion, or $1.20 a share, compared with $1.73 billion, or $1.09 a share, earned in the 2006 first quarter.
Excluding one-time items, earnings increased to $1.20 a share from last year's $1.12, topping the average analyst estimate of $1.16 a share as compiled by Thomson Financial.
Toy maker Mattel Inc. posted a 60% decline in first-quarter profit, hurt by a year-ago tax benefit, but strength in its Fisher-Price and Hot Wheels brands as well as its games business helped it beat Wall Street expectations. The stock rose 1.5% to $28.75.
Amgen Inc. was 1.6% higher at $60 in premarket trade. The company received an upgrade to overweight from equal weight from Morgan Stanley.
Other markets
Treasury prices were volatile, after the rise in the latest monthly retail sales reported was linked to higher prices. Indications of price pressure hurt the Treasury market as inflation eats into the value of bonds and puts pressure on the Federal Reserve to keep a tight monetary policy.
The benchmark 10-year note reversed direction several times. It last was up 2/32 at 99 with a yield of 4.755%.
The yen fell across-the-board early Monday, after the Group of Seven leading industrial nations at their weekend meeting failed to address the weakness in the Japanese currency. The euro was up 0.2% at $1.3548, while the dollar rose 0.3% to 119.54 yen.
The British pound rose to a 15-year high against the dollar after U.K. data showed producer prices rising faster than expected, increasing the chances of a further interest rate hike in May. The pound last traded at $1.99.10.
Gold futures were lifted by the dollar weakness. Gold for June delivery gained $2.40 at $692.30 an ounce on the New York Mercantile Exchange.
Crude-oil futures rose on concern that unrest during Nigeria's approaching presidential elections may disrupt oil supply. Crude oil for May delivery rose 25 cents at $63.88 a barrel in electronic trade. The contract lost 1% last week.
By Leslie Wines