December 10, 2010, MarketWatch
U.S. stock futures gained Friday, with the S&P 500 poised to top its 2010 highs, as Wall Street weighed the chances for compromise tax legislation as well as data showing a sharp drop in the U.S. trade deficit.
The Commerce Department reported the trade deficit narrowed to $38.7 billion in October as U.S. exports gained 3.2% and imports fell 0.5%. November import prices gained 3.7% year over year and climbed 1.3% from October. Read more about the trade data.
The much lower-than-expected trade figure could raise fourth-quarter growth estimates for the U.S. economy by half a percentage point, said Peter Boockvar, equity strategist at Miller Tabak.
Futures for the Dow Jones Industrial Average rose 11 points to 11,308.
Those for the S&P 500 were up 2.1 points at 1,230.
“Here we are at new 2010 highs. The good news is still to come: sales, profit margins and earnings. The bears had their chance, and now they are staring down the barrel of a Santa-driven battle tank,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
The Nasdaq 100 futures climbed 2.25 points to 2,202.
On Thursday, U.S. markets ended the day mostly higher as a drop in claims for unemployment benefits helped lift sentiment. The S&P 500 index rose 0.4%, while the Dow Jones Industrial Average was effectively flat.
Analysts at J.P. Morgan said Friday that they expect the S&P 500 to deliver at least a 15% rise over the course of 2011. They set a target for the index of 1,425 by the end of the coming year.
“History suggests an even stronger 20%-plus gain,” said analyst Thomas Lee in a note to clients.
He said the combination of the third year of an expansion and the third year of a presidential term has generated an average return of 20.6% in the past.
After the market opens, the University of Michigan/Reuters preliminary consumer sentiment index for December will be released.
“We’re looking for some positive news on how shoppers are feeling,” said Cantor Fitzgerald’s Pado.
In corporate news, Community Health Systems Inc. said Tenet Healthcare Corp. has rejected a takeover offer valued at $6 a share in cash and stock, or a roughly 40% premium to Thursday’s closing price.
Community Health said the equity value of the offer was $3.3 billion and that the total value would be $7.3 billion including the assumption of $4 billion of debt. See full story on Community Health’s offer.
The bid appears to have become hostile very quickly, said Wells Fargo Securities analysts. They added, however, that Tenet shareholders will find it difficult to walk away from the offer, and with a bidding war unlikely, it is probably in Tenet’s best interest to accept this bid or a slightly improved one.
In other deal news, The Wall Street Journal reported that Beckman Coulter Inc. has put itself up for sale. The company had a market value of slightly less than $4 billion at Thursday’s close and could fetch more than $5 billion in a sale, the newspaper said, citing people familiar with the matter.
In earnings news, National Semiconductor Corp. late Thursday reported second-quarter earnings of 34 cents a share, topping the consensus estimate of 32 cents a share. The group’s revenue forecast for the current quarter, however, fell short of expectations. Read more about National Semi’s results.
Standard & Poor’s also announced changes to the composition of its indexes. F5 Networks Inc., Netflix Inc. and Newfield Exploration Co. will all move from the S&P MidCap 400 to the S&P 500, replacing The New York Times Co., Office Depot Inc. and Eastman Kodak Co.
Cablevision Systems Corp. will also join the S&P 500, replacing King Pharmaceuticals Inc., which is being acquired by Pfizer Inc.
In international markets, European stocks edged mostly higher, while Asian markets ended the day broadly lower. See Europe Markets.
The French CAC 40 index rose 0.1% in midday trading, while Japan’s Nikkei 225 closed down 0.7%.