Futures Gain After Exxon Results
Wall Street looked to a higher open Monday as traders shook off fears about unrest in Egypt and pushed futures higher on the strength of ExxonMobil earnings.
The brighter tone comes after the U.S. markets tumbled on Friday, with S&P down 1.8 percent, its worse decline since August 11.
The oil giant and world leader in market capitalization posted earnings of $1.85 a share, ahead of analyst expectations of $1.63. Exxon Mobil shares gained 1.4 percent in premarket trading, and pushed futures higher after the market had been indicating a flat opening.
And in economic news, personal spending rose 0.7 percentin December, up from a 0.3 percent rise in November, for the sixth straight month of gains, the Commerce Department said Monday. Spending was expected to rise 0.5 percent according to economists surveyed by Reuters.
Meanwhile, personal income rose 0.4 percent, while savings dropped to $614.1 billion from $634.4 billion in November, the lowest level since March.
Investors remained concerned, though, that unrest in Egypt could spread to the rest of the Middle East, but analysts have said fears are already priced in after stock markets tumbled on Friday.
“Perhaps the fact that the unrest didn’t get worse” explains why Wall Street is not set to open lower, Jack Ablin, Chief Investment Officer at Harris Private Bank told CNBC. “It’s the same situation as Friday,” he said.
Egyptian protesters were camped out in central Cairo on Monday and vowed to stay until they had toppled President Hosni Mubarak. More than 100 people have been killed over six days of unrest, but the two sides have reached a stalemate. Protesters refuse to go, while the army is not moving them. The longer protesters stay unchallenged, the more untenable Mubarak's position seems, analysts said.
The unrest has caught the attention of financial markets, triggering a rise in oil prices to more than $89 a barrel and rush to safe-haven assets, like gold, Treasurys and the dollar, which fell against a basket of currencies. Meanwhile, Moody's cut Egypt's credit rating, warning on government spending.
Egypt is not a major oil producer. It produces less than a tenth of the output of Saudi Arabia. But the fact Egypt controls the Suez Canal sent jitters through the markets as traders speculated an uprising could result in closing of the canal, a major shipping artery and a minor thoroughfare for oil.
Economist Nouriel Roubini told CNBC on Monday the protests increase political risk in many parts of the world and will have a negative effect on growth.
Dutch brewer and Japanese car maker Nissan have already said they will halt production in the country temporarily and the crisis will likely affect dozens of other companies.
BP reports earnings on Tuesday.
Other stocks to watch include Home Depotfollowing an upgrade to "Buy" byGoldman Sachs which expects the company to outperform as it "delivers on well-articulated strategies to propel profitability".
Conversely, Goldman cut Lowes to "neutral," citing limited upside for the home improvement retailer during a period of management transition in the wake of Larry Stone’s retirement as President.
"We hold incumbent leadership in high regard, but see some execution risk around the combination of operating changes and management changes, and at the same time wonder whether the company can still use more of an infusion of outside ideas and talent," Goldman Sachs said in a note.
On Tap Next Week:
MONDAY: Chicago PMI, Texas manufacturing outlook survey, Atlanta Fed President speaks, farm prices; earnings from ExxonMobil, Chrysler, Baidu.com.
TUESDAY: Auto sales, ISM manufacturing index, construction spending; Earnings from BP, Pfizer, UPS, Aflac, Broadcom and Electronic Arts.
WEDNESDAY: Weekly mortgage applications, Challenger job-cut report, ADP employment report, oil inventories; earnings from Marathon Oil, Mattel, NewsCorp., Visa and Yum Brands.
THURSDAY: Chain store sales, ECB announcement, jobless claims, productivity and costs, factory orders, ISM non-manufacturing index, Bernanke at National Press Club, Minneapolis Fed President speaks, Verizon begins iPhone pre-orders; earnings from GlaxoSmithKline, Merck, Royal Dutch Shell, Sony, Unilever, MasterCard and Sunoco.
FRIDAY: Nonfarm payrolls; earnings from Aetna.
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