Indications: U.S. stock futures drop; Google up on China news

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By Steve Goldstein and Nick Godt, MarketWatch

NEW YORK (MarketWatch) -- U.S. stock futures gave back some of this week's strong gains Friday as traders position portfolios ahead of the release of second-quarter earnings.

Google rose in premarket trade after the Internet search giant renewed its Chinese license.

Losing early momentum, S&P 500 futures recently fell 1.60 points to 1,065.40 while Nasdaq 100 futures fell 5.50 points to 1,792.50. Futures on the Dow Jones Industrial Average fell 25 points.

U.S. stocks gained ground Thursday, helped by a mixed set of sales reports in the retail sector, a bigger drop in weekly jobless claims than anticipated, as well as optimism from European Central Bank President Jean-Claude Trichet and the International Monetary Fund on the economy.

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The S&P 500 has climbed 4.7% this week, including a 0.9% advance on Thursday.

"Overall, it would probably not be a surprise to see some profit taking on Friday, the question is whether the markets are moving toward a possible reversal already," said analysts at Charles Gawlak & Associates.

There's little on the economic calendar save for wholesale inventories figures in May, due for release at 10 a.m. Eastern. Overseas, Korea made a surprise rate hike and data showed Canada creating more jobs than anticipated in June.

Earnings season kicks off Monday night when Alcoa reports results. A report earlier this week from U.S. bank State Street helped boost enthusiasm for earnings.

Still, whatever hopes there are for earnings season are set against a backdrop of concern over the economy. Rob Carnell, chief international economist at ING, noted that Google searches for "double dip" have taken off, while those for "hyperinflation" have edged lower.

"One result in markets has been a decoupling of the dollar from equity markets, another has been persistent sub-3% yields on 10-year Treasuries," said Carnell. On Friday, yields on 10-year Treasury notes climbed 5 basis points to get back over the 3% mark, to 3.05%, while the dollar index /quotes/comstock/11j!i:dxy0 (DXY 83.94, +0.12, +0.14%) held around the 84 mark.

On a less serious note, the only two times a first-time World Cup winner won on foreign soil, the Dow Jones Industrial Average gained 44% in 1954 and rose 34% in 1958, notes Gary Jenkins, an analyst at Evolution Securities in London. A first-time World Cup winner on foreign soil is guaranteed since either Spain or Holland will take home the soccer title in South Africa on Sunday.

Of companies in the spotlight, Google /quotes/comstock/15*!goog/quotes/nls/goog (GOOG 463.93, +7.37, +1.61%) climbed 3% and Baidu.com /quotes/comstock/15*!bidu/quotes/nls/bidu (BIDU 70.37, -2.06, -2.84%) dropped 5% as the U.S.-based search provider said it's renewed its Chinese license. Google had earlier said it may withdraw from China.

Airgas /quotes/comstock/13*!arg/quotes/nls/arg (ARG 64.67, +0.80, +1.25%) shares fell 0.6% after Air Products /quotes/comstock/13*!apd/quotes/nls/apd (APD 69.38, +0.60, +0.87%) lifted its bid for the company to $63.50 a share in cash, which nonetheless is lower than Thursday's closing price of $63.87.

Madison Square Garden /quotes/comstock/15*!msg/quotes/nls/msg (MSG 19.65, -0.73, -3.58%) shares fell 3.9% in electronic trade as basketball star LeBron James late Thursday confirmed reports that he will join the Miami Heat, rather than the MSG-owned New York Knicks.

GlaxoSmithKline /quotes/comstock/13*!gsk/quotes/nls/gsk (GSK 34.71, -0.20, -0.57%) slipped 2.6% as the European Medicines Agency said it will review the Avandia diabetes drug.

Overseas, Asian stocks enjoyed a strong session, with the Shanghai Composite up 2.3%, while European gains were more muted, with the Stoxx Europe 600 rising 0.2%.

Gold futures added nearly $8 to $1,204.20 an ounce.

Steve Goldstein is MarketWatch's London bureau chief. Nick Godt is MarketWatch's markets editor, based in New York.

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