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Stocks are set to open higher Friday with help from positive earnings news. Fifteen minutes before the opening bell on Wall Street, stock index futures indicated that the Dow Jones Industrials ($INDU) might add 20 or 25 points in early trading. The NASDAQ ($COMPQ) is expected to add five or ten.

Microsoft (MSFT) is heading higher. After the close of trading yesterday, the world’s largest technology company reported quarterly profits of 26 cents a share. While that was below the 36 cents reported a year ago, it was three cents better than analyst estimates. In addition, sales totaled more than $12.5 billion, which easily exceeded analyst estimates of $12.08 billion.

Caterpillar (CAT) and Honeywell (HON) are both out with in-line profit reports accompanied with better than expected revenue numbers. Halliburton (HAL) posted 65 cents a share, which was 3 cents better than expectations. Mckesson (MCK) reported quarterly earnings of 79 cents a share, which beat by nine cents. Amgen (AMGN) said profits rose to 93 cents a share, up from 75 cents from a year ago and a little better than analyst estimates of 91 cents. 

In other stock news, Business Objects (BOBJ) rose almost 5% on talk that Oracle (ORCL) might be looking to take over the software maker, according to Reuters. KB Home (KBH) might see early weakness on reports the Securities and Exchange Commission [SEC] is investigating the homebuilder’s stock option granting practices.  Juniper Networks (JNPR) is expected to bounce higher after Citigroup analysts raised the rating on the stock to “buy” from “hold.”

On the economic front, the latest durable goods orders were less than expected. According to the Commerce Department, orders for factory hardgoods rose 3.1% in December, compared to 2.2% in November and economist estimates for a 3.5% advance. A report on new home sales is due out at 10:00 a.m. Eastern time. The report is expected to show sales of new homes rising modestly in December, to an annual rate of 1.05 million units from 1.047 million in November.

Bonds were able to rebound from the lows of the day following the weaker-than-expected durable goods report, but remain under water heading into the new home sales numbers. The benchmark ten-year Treasury note is down three ticks and, after a brutal round of selling this week, the yield is at five-month highs of 4.88%. Crude oil is higher as well, up 41 cents a barrel to $54.64. Gold slipped. After falling roughly $6.00 from its highs of the day on Thursday, the precious metal [February] is down another $2.40 to $646.00 an ounce this morning.    

For stocks, the main catalyst for market action has been the earnings news. It has been mostly positive this morning, but there are concerns about the pace of earnings growth going forward. In addition, the recent rebound in crude oil prices along with the spike in rates seems to be weighing somewhat on investor sentiment. As a result, the Dow slid 119 points and the NASDAQ lost 32 on Thursday and trading might remain cautious on Friday ahead of key events next week including the Federal Reserve Open Market Committee [FOMC] meeting on interest rate. 

Frederic Ruffy 
Senior Writer 
Optionetics.com ~ Your Options Education Site

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