MarketWatch.com - Pre-Market Indications

Friday, October 29, 2010

Indications: U.S. stock futures off lows following GDP report

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By Barbara Kollmeyer and Kate Gibson, MarketWatch

NEW YORK (MarketWatch) â€" U.S. stock futures moved off the worst levels of the session Friday after the government reported the economy grew at a slightly more rapid pace during the summer.

The data on U.S. economic expansion comes ahead of next week’s midterm elections and the Federal Reserve’s monetary-policy meeting, which is expected to result in further economic stimulus.

U.S. stock-index futures came off their lows after the report showing the economy expanded at a 2% annual rate in the third quarter, improving from the tepid 1.7% growth seen in the prior three-month period. See story on GDP data.

“The economy is still growing but below its potential,” wrote Peter Boockvar, equity strategist at Miller Tabak.

Erasing a roughly 50-point fall, futures for the Dow Jones Industrial Average /quotes/comstock/21b!f:dj\z10 (DJZ10 11,029, -20.00, -0.18%)  added 1 point to 11,050, while those for the S&P 500 index /quotes/comstock/21m!f:sp\z10 (SPZ10 1,177, -2.30, -0.20%)  were down less than 1 point at 1,179..

Nasdaq 100 futures /quotes/comstock/21m!f:nd\z10 (NDZ10 2,125, -1.25, -0.06%)  were up 1.75 point at 2,127.5.

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Stocks finished mixed on Thursday, with shares of 3M Co. /quotes/comstock/13*!mmm/quotes/nls/mmm (MMM 84.34, -0.73, -0.86%)  falling nearly 6% after the conglomerate lowered its sales forecasts for the year, partly due to softer demand.

But markets remained mostly preoccupied with the potential for quantitative easing at next week’s Fed meeting.

At 9:45 a.m. Eastern, Chicago PMI for October is due for release, and at 10 a.m. consumer sentiment for October is scheduled.

“We’re in a slightly surreal world where fixed income, gold and equities have done well, but all three horses can’t keep going in the same direction,” said Justin Urquhart Stewart, director of Seven Investment Management.

“Equities have had a nice run indeed, but are quite possibly in for a period of turmoil and turbulence while we look forward to seeing where the growth is coming from,” he said, adding that any quantitative easing won’t help the housing market, one difficult issue for the U.S. economy.

As for U.S. earnings, he said, while they’ve been upbeat, they are basically backwards-looking, and the view for share gains of companies is dim for a few reasons. “Companies are not investing much in the way of capital expenditure, hoarding cash and paring down debt. If the opportunity comes to take out the competitor, they’ll do it, but with cash,” he said.

As for earnings Friday, pharmaceutical giant Merck & Co. /quotes/comstock/13*!mrk/quotes/nls/mrk (MRK 36.13, -0.81, -2.19%)  reported a 90% fall in third-quarter earnings, owing to charges. On an adjusted basis, the company earned 85 cents, beating consensus.

Chevron Corp. /quotes/comstock/13*!cvx/quotes/nls/cvx (CVX 82.99, -1.45, -1.72%)   reported income fell almost 2% in the third-quarter, with shares of the country’s second-biggest oil company falling 1.4% in premarket trade.

Newell Rubbermaid Inc. /quotes/comstock/13*!nwl/quotes/nls/nwl (NWL 17.43, -0.37, -2.08%)  reported a 67% fall in third-quarter net income. Adjusted earnings were 42 cents compared to 38 cents a year ago, narrowly beating forecasts.

Shares of Microsoft Corp. /quotes/comstock/15*!msft/quotes/nls/msft (MSFT 26.73, +0.45, +1.71%)  rose 3.4% in premarket trading, after the company posted a 52% gain in first-quarter profit late Thursday, topping Wall Street expectations.

Barbara Kollmeyer is an editor for MarketWatch in Madrid. Kate Gibson is a reporter for MarketWatch, based in New York.

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