Futures Fall on Euro Worries; M&A Heats Up

U.S. stock index futures declined ahead of the open Monday in the wake of lackluster employment data Friday and as debt fears continued to sweep through European markets.

The Friday after December's nonfarm payrolls growth came in lower than expected. Bank shares fell sharply after a Massachusetts court ruling worried investors that the foreclosure fraud scandal could escalate.

Investors' attention now turns to the coming earnings season with Alcoa due to release figures after the closing bell.

Mergers and acquisition activity heated up, but failed to lift markets.

DuPont offered to buy Danish food ingredients and enzymes firm Danisco for $5.8 billion. The U.S. chemicals firm plans to use the deal to boost its position in the food sector.

Duke Energy reached a deal to buy Progress Energy for $46.13 a share to create the nation's largest energy company. The deal represents a modest 4 percent premium over Friday's closing price for Progress.

A report at the weekend said that Johnson & Johnson made a bid for Europe's largest maker of replacement knees and hips, Smith & Nephew. Shares in Smith & Nephew jumped 10 percent Monday morning.

Food and beverage company Sara Lee may be the target of an acquisition by private equity firms including Apollo Global Management.

Goldman Sachs upgrades Target to "buy" from "neutral," and downgraded Wal-Mart from "neutral" from "buy." 

UBS, meanwhile, upgraded the financial sector to "overweight" from "market weight," saying financials should do well because of improving loss trends, a rise in loan demand, a steeper yield curve and attractive valuations. The brokerage said large banks and brokers will benefit most from the trends. 

UBS added General Electric and Fordto its U.S. key calls list. 

The price of oil was higher following the shut down of a . The price of gold was little changed while the dollar was largely flat against the euro and yen.

European shares fell as concerns over the region's debt situation returned to weigh on investor sentiment. The yield on Portuguese debt rose as the country came under increasing pressure to seek financial aid.

after data showed China's 2010 trade surplus narrowed for the second year in a row. Japanese indexes closed flat, while Taiwanese and Australian stocks managed slight gains. 

At 12:40 pm New York time, Atlanta Federal Reserve President Dennis Lockhart will discuss the economic outlook when he speaks in Atlanta. 

And the is giving people with secure jobs the confidence to go out and spend more, which is boosting retail sales, analysts told the Associated Press. 

On Tap Next Week:

MONDAY: Employment trends index, Atlanta Fed President speaks, National Retail Federation Retail Show, Detroit Auto Show; after-the-bell earnings from Alcoa.
TUESDAY: National Federation of Independent Businesses Small Business Optimism Index, Philadelphia and Minneapolis Fed Presidents speak, wholesale trade, 3-yr note auction; before-the-bell earnings from Lennar, Chevron interim results.
WEDNESDAY: Weekly mortgage applications, imports-exports price indexes, oil inventories, 10-year Treasury note auction, Federal Reserve’s Beige Book, Federal Reserve Chairman Timothy Geithner speaks; Dallas Fed President speaks.
THURSDAY: Bank of England and European Central Bank announcements, international trade, PPI, jobless claims, 30-year Treasury bond auction; after-the-bell earnings from Intel.
FRIDAY: CPI, retail sales, industrial production, consumer sentiment, business inventories, Richmond Fed president speaks; before-the-bell earnings from JPMorgan.

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