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Monday, January 11, 2010

Indications: U.S. stock futures rise on eve of earnings season

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By Steve Goldstein, MarketWatch

LONDON (MarketWatch) -- U.S. stock futures rose Monday on the eve of fourth-quarter earnings season as confidence grew that corporate profits and the economy at large will stay on the mend.

S&P 500 futures rose 6.2 points to 1,147.80 and Nasdaq 100 futures rose 9.25 points to 1,899.20. Futures on the Dow Jones Industrial Average rose 48 points.

A late round of buying nudged U.S. stocks higher on Friday, with the Dow Jones Industrial Average rising 11 points, the S&P 500 adding 3 points and the tech-heavy Nasdaq Composite gaining 17 points. Markets took in stride news that 85,000 nonfarm payrolls jobs were lost in December, defying economist expectations for a small rise.

Since the beginning of 2008, the S&P 500 has averaged a 0.3% gain on days when the Labor Department's jobs report fell shy of expectations, while the index has fallen 0.1% on days when it beat expectations, according to data from Schaeffer's Investment Research in Cincinnati.

Ian Harwood, an economist for Evolution Securities in London, said the same leading indicators that markets ignored in 2007 of an early recession are telling a story that the market is too cautious for 2010.

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Indicators he sees as pointing to positive signs include non-financial company profits, the steepness of the bond market yield curve, improving composite leading indicators and more reasonable house prices.

"It's not obvious to us, though, that these critically important indicators are being followed any more closely now than was previously the case," he said.

Joseph LaVorgna of Deutsche Bank added that the payrolls report showed that temporary worker employment has picked up the last five months in a row. "This should bode well for an eventual pickup in more permanent hiring," he said.

St. Louis Fed President James Bullard, speaking in Shanghai, said U.S. interest rates may remain low for quite some time and that U.S. consumption seems to be stabilizing.

Bullard noted that Asia has been a leader in terms of a global recovery, and China released data showing that exports surged 18% in December, after a 1.2% drop in November.

Meanwhile, earnings season starts after the close of action on Monday, when Dow industrials component and aluminium producer Alcoa /quotes/comstock/13*!aa/quotes/nls/aa (AA 17.02, +0.41, +2.47%) releases results.

S&P 500 companies are expected to post operating earnings of $15.80 a share for the fourth quarter, up from $5.62 a share in the fourth quarter of 2008, according to Thomson Reuters.

On the M&A front, Heineken /quotes/comstock/11i!hinky (HINK.Y 23.70, +0.14, +0.59%) said it will pay $5.5 billion in the stock for the Mexican brewing operations of Femsa /quotes/comstock/13*!fmx/quotes/nls/fmx (FMX 49.77, -0.24, -0.48%) . Femsa will own 20% of Heineken and continue to hold Coca-Cola Femsa /quotes/comstock/13*!kof/quotes/nls/kof (KOF 64.81, -1.24, -1.88%) .

Asian markets were generally stronger while Japan was shut for a holiday, with the Shanghai Composite rising 0.5%. Europe stocks also rose, with the Dow Jones Stoxx 600 rising 0.8%.

Yields on 10-year Treasury bonds stayed at 3.84%, while gold futures surged over $20 an ounce and crude-oil futures rose 80 cents a barrel.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 77.01, -0.17, -0.22%) dropped 0.6%.

Steve Goldstein is MarketWatch's London bureau chief.


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