Stock futures rise on durable goods, Caterpillar
Fed meets this week; Apple cut to neutral at Baird
NEW YORK (MarketWatch) — U.S. stock futures gained Monday after equipment-maker Caterpillar Inc. reported a better-than-expected quarterly profit and orders for durable goods jumped in December.
Caterpillar (NYSE:CAT) shares climbed 2.1% in premarket trade after the blue-chip company reported fourth-quarter profit that beat expectations. Read: Caterpillar’s fourth-quarter profit drops 55%.
Stock-index futures added to modest gains after the Commerce Department reported orders for big-ticket U.S. goods rose 4.6% last month.
S&P 500 Index futures (GLC:SPH3) rose 2.5 points, or 0.2%, to 1,498.20, while futures on the Dow Jones Industrial Average (CBE:DJH3) gained 30 points, or 0.2%, to 13,842. Nasdaq 100 futures (CME:NDH3) (CME:NDH3) rose 3.25 points, or 0.1%, to 2,731.25.
Wall Street rose Friday, with the S&P 500 (SNC:SPX) closing above the 1,500 level for the first time since 2007.
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“Stocks are strong. The next point that needs to be addressed is that stocks are very extended in the short term and a light-volume pullback would do wonders to restore the health of this rally,” said Adam Sarhan, chief executive of New York-based Sarhan Capital, in a note.
Data points and the Fed
A stream of top-tier economic data, culminating Friday with the release of U.S. nonfarm payrolls and other employment figures for January, is on tap this week. The Federal Reserve concludes its first policy meeting of 2013 on Wednesday. See: Wall Street’s ‘Super Bowl’ set to kick off .
Budget concerns may also be in the mix after Rep. Paul Ryan, chairman of the House Budget Committee and the 2012 Republican vice presidential nominee, said he expects steep automatic cuts in federal spending to take place March 1. Read about Ryan’s comments .
No policy changes are expected from the Fed this week, but investors will be on the lookout for further clues to policy makers’ assessment of the economic recovery. The U.S. central bank last year said it was committed to holding interest rates near zero as long as unemployment remained above 6.5% and inflation remained below 2.5%.
It‘s less clear, however, what it would take to get the Fed to end its open-ended third round of quantitative easing, widely known as QE3, according to Philip Marey, senior U.S. strategist at Rabobank International.
Federal Reserve headquarters in Washington (2012 file photo).
Minutes of previous Fed meetings have highlighted a wide divergence of opinion over the potential time frame for the program. The liquidity boost provided by the Fed’s QE program has been credited with helping to lift stocks, commodities and other so-called risk assets in recent years.
“In practice, a number of months of nonfarm-payroll growth above 200,000 is likely to make the [policy-making Federal Open Market Committee] start thinking about terminating QE3,” Marey wrote in a note. “Since we expect the U.S. economy to reaccelerate in the second half of the year, after the fiscal deadlines have passed, we may see increasing speculation on the termination of QE3 as we approach the end of the year.”
Earnings season remains in full swing. See: 10 key earnings in the week ahead .
More than two weeks into the fourth-quarter reporting period, earnings growth has met the expected range of 2% to 3% due in large part to results from the financial and materials sectors, according to FactSet and Thomson Reuters I/B/E/S. Around two-thirds of companies have topped expectations, roughly matching the average seen over the past year. See: Lackluster Q4 earnings just what market wanted .
Caterpillar, the world’s largest maker of tractors and excavators, earlier this month said it would take a $580 million charge as a result of “accounting misconduct” at a unit of a Chinese mining equipment company it bought last year.
Biogen Idec Inc. (NASDAQ:BIIB) on Monday said fourth-quarter earnings fell 2.7% as the biotechnology firm’s efforts to bulk up its product pipeline overshadowed revenue growth. The company also forecast 2013 adjusted earnings weaker than analysts’ estimates, but foresaw revenue growth that would outpace Wall Street expectations. See: Biogen Q4 net off 2.7% on higher costs; revenue up .
Top car makers will also be in focus on Monday. In particular, Toyota Motor Corp. (NYSE:TM) (TYO:JP:7203) reported a 23% increase in global sales to a record 9.75 million vehicles for 2012. That means Toyota overtook General Motors Co. (NYSE:GM) to again become the world’s largest car maker. Read: Toyota outsells GM to reclaim crown as world No. 1 .
Analysts at Robert W. Baird cut their rating on tech behemoth Apple Inc. (NASDAQ:AAPL) to neutral from outperform, citing “several near-term risks, particularly consensus estimates that we believe remain frustratingly too high.” Baird also cut its price target to $465 from $570. See: Apple cut to neutral at Baird .
Despite its heavy weighting and wide ownership, stock indexes have taken Apple’s recent, sharp slide in stride. Apple shares fell another 2.4% on Friday, with the company relinquishing its title as the world’s largest company by market capitalization back to blue-chip energy component Exxon Mobil (NYSE:XOM) . See: Apple falls behind Exxon Mobil as most valuable company .
Internet-services firm Yahoo Inc. (NASDAQ:YHOO) is set to report after the closing bell, with analysts forecasting the Sunnyvale, Calif., company to post fourth-quarter earnings of 27 cents a share on revenue of $1.21 billion. Read: Yahoo report to be scanned for turnaround evidence.
And bookseller Barnes & Noble Inc. (NYSE:BKS) told The Wall Street Journal that it expected to close up to a third of its retail stores over the next decade. As of Jan. 23, Barnes & Noble operated 689 retail stores; in 10 years it expects to operate 450 to 500. Barnes & Noble also has a separate chain of 674 college stores, the Journal reported.