MarketWatch.com - Pre-Market Indications

Friday, July 23, 2010

Indications: Futures gain with earnings, stress tests in focus

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By Polya Lesova and Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks readied for opening gains Friday as another spate of upbeat earnings from companies including Honeywell International Inc. and Ford Motor Co. spurred hope that the economic recovery still has traction.

"Investor jitters regarding the economy and corporate earnings growth appear to have slightly subsided," Fred Dickson, chief market strategist at Davidson Cos., wrote in a research note.

S&P 500 futures gained 3.60 points to 1,091.10, and Nasdaq 100 futures rose 2 points to 1,854.75. Futures on the Dow Jones Industrial Average advanced 16 points to 10,283.

"We do believe that the current economic situation is not as bad as many traders feared earlier in the week," Dickson added.

But major moves could well be on hold ahead of European bank stress tests. Investors around the globe are looking to the results of the tests to shed light on how European debt might impact the global economy. Read more about the stress tests.

The Dow /quotes/comstock/10w!i:dji/delayed (DJIA 10,425, +102.32, +0.99%) rallied 201.77 points, or 2%, Thursday, posting its biggest point and percentage gain in more than two weeks.

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Microsoft Corp. /quotes/comstock/15*!msft/quotes/nls/msft (MSFT 25.81, -0.03, -0.12%) , Ford /quotes/comstock/13*!f/quotes/nls/f (F 12.72, +0.63, +5.21%) and American Express Co. /quotes/comstock/13*!axp/quotes/nls/axp (AXP 44.79, +1.60, +3.70%) all reported quarterly earnings that exceeded Wall Street's expectations.

Recent earnings results have increased investor confidence that the economic future is less bleak than one might think after a stream of disappointing U.S. economic reports.

Among shares destined to move on Wall Street, Amazon.com Inc. /quotes/comstock/15*!amzn/quotes/nls/amzn (AMZN 118.87, -1.20, -1.00%) dropped in preopen trading, after the online retailer late Thursday reported that earnings surged, but missed Wall Street forecasts. Read more on Amazon's results.

Honeywell /quotes/comstock/13*!hon/quotes/nls/hon (HON 43.50, +0.84, +1.97%) jumped after the diversified manufacturer said second-quarter earnings rose to $468 million, or 60 cents a share, on sales of $8.16 billion. On average, analysts polled by FactSet Research were expecting a profit of 57 cents a share on revenue of $7.99 billion.

BP PLC /quotes/comstock/13*!bp/quotes/nls/bp (BP 36.86, +0.63, +1.74%) /quotes/comstock/23s!a:bp. (UK:BP. 398.60, -1.40, -0.35%) could be in focus. Tropical Storm Bonnie was heading toward the Gulf of Mexico, forcing the oil giant to temporarily suspend relief-well activities. Read more about BP.

Rex on Techs: Yahoo tests investors' patience

Shares of Ericsson AB /quotes/comstock/15*!eric/quotes/nls/eric (ERIC 11.28, -0.86, -7.08%) fell ahead of the U.S. open after tumbling in Swedish markets. The group's second-quarter net profit fell short of market expectations, and sales declined 8% because of supply issues and component shortages. Read more on Ericsson.

Also on the earnings front, blue-chip Verizon Communications Inc. /quotes/comstock/13*!vz/quotes/nls/vz (VZ 28.02, +1.02, +3.78%) said it had a second-quarter net loss of $198 million, or 7 cents a share, which included 65 cents a share in charges related to an employee severance plan. At $26.8 billion, revenue just missed Wall Street expectations. Read more on Verizon.

Eyes on European stress tests

The Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:SXXP 255.97, +1.60, +0.63%) edged up 0.3% in midday trading, as investors awaited results from the European bank stress tests, which will be released starting at noon Eastern time.

"Overall, the transparency bar has been lowered and markets will now more likely gloss over vague details about how the stress tests were constructed," Deutsche Bank strategists wrote in a note to clients. "So our best guess is that these results kick the can further down the road without fully putting the matter to bed."

Shares of Germany's Deutsche Bank /quotes/comstock/13*!db/quotes/nls/db (DB 64.54, +0.27, +0.42%) edged up 0.2%, while France's BNP Paribas /quotes/comstock/24s!e:bnp (FR:BNP 49.82, -0.03, -0.06%) rose 0.3% and Credit Agricole /quotes/comstock/24s!e:aca (FR:ACA 9.36, -0.11, -1.11%) dropped 0.7%.

Spanish banking giant Santander /quotes/comstock/06x!csan (ES:SAN 10.12, +0.13, +1.34%) /quotes/comstock/13*!std/quotes/nls/std (STD 13.29, +0.33, +2.55%) gained 0.4%.

Shares of Vodafone Group /quotes/comstock/15*!vod/quotes/nls/vod (VOD 23.24, +0.46, +2.02%) gained 0.9% in London after the company reported a 5% improvement in quarterly sales and announced it will pay 1.25 billion pounds ($1.9 billion) to settle outstanding tax issues in the U.K. See more on Vodafone.

In the commodity markets, September crude-oil futures fell 74 cents to $78.56 a barrel in electronic trading on the New York Mercantile Exchange.

Gold futures rose $1.3 to trade at $1,196.9 an ounce.

Polya Lesova is a reporter for MarketWatch, based in Frankfurt. Kate Gibson is a reporter for MarketWatch, based in New York.

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