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Futures Trim Gains After Trade Deficit News

CNBC.com
Friday, 10 Dec 2010 | 9:13 AM ET

U.S. stock index futures eased gains ahead of the open Friday after the U.S. trade deficit narrowed more than expected in October as investors focused on slowing U.S. demand.

The trade gap fell to $38.7 billion, down from a revised $44.6 billion in September. Analysts surveyed by Reuters had expected the gap to fall slightly to $43.6 billion. Exports rose 3.2 percent and imports declined slightly on slowing demand for industrial and petroleum products, the Commerce Department said Friday.

Earlier, futures were higher as investors considered the possibility of monetary tightening from China against strong economic data in the region. Both China's import and export data came in stronger than expected in November, giving rise to expectations of interest rate hikes. Later in the day, Chinese officials raised bank reserve requirements in a move to curb inflation.

"There's quite a lot of hesitation in the market, particularly after the figures from China," Ben Critchley, CFD sales trader at IG Index, told CNBC.com.

Investors don't want to be caught on the wrong side of a possible rate hike in China next week, Critchley said.

Standard & Poor's reshuffled the broad S&P 500 index, pulling the New York Times , Eastman Kodak and Office Depot and replacing them with Netflix , F5 Networks and Newfield Exploration , wihch had been in the S&P MidCap 400. Also Cablevision Systems will replace King Pharmaceuticals , which is being acquired by Pfizer.

Asian indexes closed mostly in the red, but Chinese stocks closed firmly in the green after the economic release. European shares struggled to find direction after a positive open fizzled out.

In the U.S., Pimco's Chief Executive Mohamed El-Erian said the bond-fund manager had raised its expectations for growth in the economy. El-Erian told CNBC that the recent compromise on the Bush-era tax extension would help boost the economy for now.

The tax proposal came under fierce criticism from Democrats in the U.S. House of Representatives Thursday. The Senate has scheduled a vote on the measure for Monday.

On the M&A front, Community Health Systems made an unsolicited takeover offer for Tenet Healthcare for $3.3 billion. The deal would create the biggest hopsital of hospital facilities.

And Beckman Coulter skyrocketed in premarket trading after news it was reportedly putting itself up for sale. Beckman makes biomedical testing instrument systems and supplies.

Elsewhere in stock news, Procter & Gamble rose slightly in the pre-market after Goldman Sachs upgraded the consumer products giant to "buy" from "neutral," and raised its price target to $75 a share from $71.

Treasurys are likely to remain in focus after the heavy selloff this week.

Elsewhere in economic news, consumer sentiment data will be released at 9:55 am. And the U.S. Treasury budget will be out at 2 p.m.

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