By Mark Cotton, MarketWatch
Last Updated: 9:22 AM ET Jan 17, 2006
NEW YORK (MarketWatch) -- U.S. stock futures are pointing to a sharply
lower open Tuesday, hurt by a surge in crude-oil prices, with Guidant Corp
once again in focus after Boston Scientific's sweetened $27 billion offer for
the medical-devices maker.
Dow futures were off 45 points at 10,950, Nasdaq 100 futures fell 13.5
points to 1,746.50 while S&P 500 futures dropped 5.2 points to 1,287.50.
"The back-up in oil prices due to intensifying geopolitical problems is
obviously weighing and will overshadow any bullish sentiment that's linked to
earnings or economic data," said Peter Cardillo, chief market analyst at S.W.
Bach.
On Friday, stocks ended mixed, wrapping up a week which saw the Dow Jones
Industrial Average breach 11,000 for the first time in four and a half years,
but profit warnings from a number of blue-chip names left some investors
wondering whether the upcoming earnings season will live up to expectations.
The Dow industrials fell 2.49 points to 10,959.87. On the week, the
benchmark index ended virtually unchanged.
The Nasdaq Composite Index was up 0.35 point at 2,317.04. The tech-rich
index posted a weekly gain of 0.5%.
The S&P 500 Index was up 1.55 points at 1,287.6. The broad gauge fell 0.2%
on the week.
A fresh spike in oil prices was giving cause for concern ahead of the
market open.
The benchmark February contract was up $1.38 at $65.30 a barrel in
electronic trading amid supply concerns as attacks continued on Royal Dutch
facilities in Nigeria threatening exports from that country. Possible fallout
from Iran's resumption of its nuclear program was another factor boosting
crude prices. See Futures Movers.
On the data front, manufacturing activity in the New York area expanded at
a slower pace in January, the New York Federal Reserve Bank said. The bank's
Empire State Manufacturing index fell to 20.1 in January from a revised 26.3
in December. The decline was roughly in line with expectations. The prices-
paid index, a measure of inflation, held steady. See full story.
U.S. industrial output, meanwhile, increased 0.6% in December while
capacity utilization soared to 80.7%, the highest since October 2000, the
Federal Reserve said. The increase in capacity utilization could raise red
flags at the Federal Open Market Committee, which warned in December that
decreasing slack in the economy could fuel inflationary pressures.
The dollar extended early gains against the euro and the Japanese yen on
fears the stronger-than-expected industrial output and capacity utilization
data could cause the Federal Reserve to extend its cycle of interest rate
hikes.
The euro was off 0.4% at $1.2063. Against the Japanese yen, the greenback
was up 0.3% at 115.42.
Strength in the dollar weakened gold. The benchmark February contract fell
$1.10 to $555.90 an ounce in early trading.
On the bond market, long-term Treasuries traded flat. The benchmark 10-
year note was unchanged at 101 4/32, with its yield at 4.36%.
Shares in Guidant Corp. soared 7.4% to $76.10 in pre-market trading on
Instinet after Boston Scientific raised its offer for the medical devices
maker to around $27 billion, or $80 a share from $73 a share.
Boston Scientific noted its bid represents a premium of $3.3 billion, or
$9 per share, over the competing offer of Johnson & Johnson. Boston said its
amended offer expires at 5 p.m. Eastern on Tuesday unless its offer is
declared "superior" by Guidant's board, a condition that would move the
offer's expiration back to Jan. 25. On Friday, Johnson & Johnson shares fell
39 cents to $61.82. Boston Scientific shares fell 2.8% to $24.50 ahead of the
bell. Read about the new bid.
McDonald's Corp. shares rose 28 cents to $34.75 in pre-market dealings
after the fast-food giant said it expects fourth-quarter earnings of 48 cents
a share, a penny above current Thomson First Call estimates. The company also
reported a 5% jump in December sales from restaurants open at least a year,
known as same-store sales.
Shares in Caterpillar Inc. fell 1.1% to $61.65 in pre-market trading as
Lehman Bros cuts its rating on the industrial and farm equipment maker as part
of a broader downgrade of the machinery sector. The broker said the company is
set to hit its cyclical earnings peak in 2007.
Lehman Bros.' view appeared to outweigh a more positive take from
Citigroup, which upgraded the company to a buy, saying a survey of global
construction dealers indicates industry demand continues to outstrip supply.
After the close, Dow components Intel Corp. and International Business
Machines are set to report their quarterly results. Investors are hoping
strong earnings from these two companies will help erase last week's
disappointing results out of fellow Dow member Alcoa Inc. and a profit warning
from DuPont, another component of the blue-chip index.
Yahoo is also slated to report after the bell.
California-based Wells Fargo & Co led a number of banks, mostly regional,
reporting their earnings. Wells' fourth-quarter net-income rose 8% but a spike
in personal bankruptcies weighed on results, and its earnings per share came
up a penny shy of estimates. On Friday, the stock rose 36 cents to $63.25.
Fifth Third Bancorp, U.S. Bancorp, AmSouth Bancorporation, National City
and Texas Regional were some of the other banks posting their earnings.
Elsewhere, there was mixed news for homebuilders. M.D.C. Holdings Inc.,
should see early gains after the company posted fourth-quarter results that
handily topped analyst estimates On Friday, the stock ended down 21 cents at
$65.18.
But Toll Brothers Inc. could come under pressure after Bank of America
downgraded the homebuilder to sell from neutral, citing slowing demand for
more expensive new houses. On Friday, the stock fell 47 cents to $37.74.
Mark Cotton is a reporter for MarketWatch in New York.
Copyright (c) 2006 Thomson Financial. All rights reserved.
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SOURCE Thomson Financial Corporate Group
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