- Pre-Market Indications

Friday, October 22, 2010

Indications: U.S. stock futures edge up amid earnings reports

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By William L. Watts, MarketWatch

LONDON (MarketWatch) â€" U.S. stock futures rose modestly Friday on a continued flow of strong earnings reports, but strategists said investors may be reluctant to press positions as finance officials from the Group of 20 nations gather in South Korea and concerns linger over the economic outlook.

Futures on the Dow Jones Industrial Average /quotes/comstock/21b!f:dj\z10 (DJZ10 11,080, -3.00, -0.03%)  rose 22 points to 11,105, while S&P 500 futures /quotes/comstock/21m!f:sp\z10 (SPZ10 1,177, +1.30, +0.11%)  gained 2.6 points to 1,178.30. Nasdaq 100 futures /quotes/comstock/21m!f:nd\z10 (NDZ10 2,100, +20.00, +0.96%)  added 7.5 points to trade at 2,087.50.


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Earnings data continued to flow on Friday, with industrial conglomerate Honeywell International Inc. /quotes/comstock/13*!hon/quotes/nls/hon (HON 46.56, -0.11, -0.23%)  reporting that its third-quarter profit fell to $497 million, or 64 cents a share, from $619 million, or 80 cents, in the same period last year.

Excluding a one-time charge, the company said it earned 82 cents a share. A Factset Research survey of analysts produced a consensus forecast of 62 cents a share. Sales rose to $8.39 billion from $7.7 billion.

Oil field-services giant Schlumberger Ltd. /quotes/comstock/13*!slb/quotes/nls/slb (SLB 67.23, +2.92, +4.54%) reported an 11% rise in adjusted net income to $875 million, or 70 cents a share, matching forecasts.

Verizon Communications /quotes/comstock/13*!vz/quotes/nls/vz (VZ 31.80, -0.72, -2.21%)  said its third-quarter earnings fell 25% to $881 million, or 31 cents a share. Stripping out one-time items, the telecom company said it would have earned 56 cents a share, topping the consensus estimate of 54 cents.

KeyCorp /quotes/comstock/13*!key/quotes/nls/key (KEY 8.22, -0.12, -1.44%)  said it swung to a third-quarter net profit of $219 million, or 20 cents a share, from a loss of $397 million, or 52 cents, in the same period last year. The bank said earnings from continuing operations were 19 cents versus a loss of 50 cents a year earlier. Analysts polled by Factset had expected earnings of three cents a share.

In Asia, G-20 financial officials are expected to attempt to soothe growing currency-related tensions, although expectations for a substantive agreement are low. Read story on G-20 meeting

Michael Hewson, strategist at CMC Markets, said the third-quarter earnings season has presented investors with a paradox created by strong profits and weak U.S. economic data.

“At some point, that paradox has to come back into line,” he said.

Also, while recent gains by equities have been fueled in large part by stronger-than-expected earnings, Hewson said, revenue data have lagged. That indicates U.S. companies have boosted earnings by cutting costs, a process that can go only so far, he said.

In that vein, Gary Jenkins, head of fixed income at Evolution Securities, noted earlier Friday that 85 of the 103 companies on the S&P 500 that had reported this week saw earnings come in ahead of expectations, pushing this season's “beat rate” to 81% versus 75% in the second quarter. Only 46 of the 103 companies, however, have reported better-than-expected revenue figures, for a beat rate of 44%, he said.

No major U.S. economic data are scheduled for release Friday.

European stocks traded flat in afternoon activity Friday, with the pan-European Stoxx 600 index /quotes/comstock/22c!sxxp (ST:SXXP 266.73, -0.89, -0.33%)  virtually unchanged on the day. Shares of Swedish telecom giant Ericsson /quotes/comstock/22u!e4:se0000108656- (SE:ERICB 74.90, +3.00, +4.17%)   /quotes/comstock/15*!eric/quotes/nls/eric (ERIC 11.27, +0.50, +4.64%)  rose nearly 7% after the firm topped expectations on net income. Read Europe Markets for more.

U.S. stock indexes posted modest gains Thursday, with a boost from a further run of positive earnings outweighing currency-related jitters.

The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 11,114, -32.25, -0.29%)  gained 0.4% Thursday to close at 11,146.5. The Standard & Poor’s 500-share index /quotes/comstock/21z!i1:in\x (SPX 1,180, -0.02, 0.00%)  rose 0.2% to close at 1,180.26, while the Nasdaq Composite /quotes/comstock/10y!i:comp (COMP 2,471, +11.11, +0.45%)  gained 0.1% to end at 2,459.67.

The U.S. dollar was little changed versus most major rivals. The euro /quotes/comstock/21o!x:seurusd (EURUSD 1.3900, -0.0021, -0.1509%)  erased a small early loss to trade 0.1% higher versus the greenback at $1.3936. Read Currencies for more

Gold futures fell $4.50 to $1,321.10 an ounce in electronic trade, while crude-oil futures were up 80 cents at $81.36 a barrel.

William L. Watts is a reporter for MarketWatch in London.

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