Day Ahead: Eurozone Members Help Stocks

 | Oct 10, 2011 | 8:27 AM EDT
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With Germany and France saying they'll develop a plan to recapitalize eurozone banks, world stocks were on the upswing. But the world will have to wait until the end of the month to find out what that plan is.

Nonetheless, NYSE and Nasdaq futures followed Europe and Asia higher. In addition to watching European developments, U.S. traders are preparing for earnings season, which gets under way this week.

Though it's Columbus Day, and many government agencies and banks will be closed, equities trading will take place as usual. But the U.S. bond market is shuttered. 

French-Belgian bank Dexia, which had been the world's biggest lender to municipalities, said Monday that the Belgian government would buy the local unit for $5.4 billion. Belgium will also guarantee 60% of a "bad bank" to contain Dexia's toxic assets.

The euro was trading higher ahead of Wall Street's open.

Asian stocks closed mostly higher on news of the German-French plan to float a plan. In Shanghai, traders returned from a week-long holiday to send stocks to a lower finish.

Because government agencies have the day off, there are no major econ reports due out today.

Likewise, investors and traders will have to wait a day to see how the next round of earnings reports begins to take shape. Tomorrow brings the third-quarter report from DJIA component Alcoa (AA), which traditionally brings the unofficial start to earnings season.

In the past few weeks, analysts have slashed earnings forecasts for companies in all the S&P sectors.

In commodities trade, crude oil prices advanced $1.48 per barrel to $84.46 ahead of Wall Street's open. 

OPEC's largest producer, Saudi Arabia, said there is no current justification to increase output, because production from other countries is meeting world demand.

Gold, which ended last week higher, was up $29.60 per ounce in Nymex trade, to $1,665.40.

Silver also followed last week's gains with early upside trade. The precious metal was up $1.177, to $32.17 an ounce.

Copper, which has plunged in recent weeks on worries about a China economic slowdown, got a bounce early Monday. The industrial metal was up $0.0475 per pound, to $3.32. 

Alcoa was a big premarket mover in early trade. With its earnings report eagerly anticipated, traders and analysts have been eyeing effects of the lower price of aluminum, as well as higher input costs. Margins will be closely scrutinized tomorrow when the company reports.

Early Monday, Alcoa shares rose 35 cents, 3.60%, to $10.06. The stock is up 1.5% so far this month, following six months in a row of losses.

Superior Energy (SPN) fell $2.47, 9.01%, to $24.94 in early trade, on news that it would buy fellow oil-and-gas field services company Complete Production Services (CPX) for $2.72 billion.

Complete shares zoomed $8.77, 43.03%, to $29.15 in the premarket.

S&P 500 component Yahoo (YHOO) jumped $0.54, 3.49%, to $16.01 in the premarket. The move follows news that founder, former CEO and current board member Jerry Yang is interested in pursuing a private-equity deal to take the company off the public market.   

A downside mover ahead of the bell was Sprint Nextel (S), shedding $0.14, 5.81%, to $2.27. A round of downgrades helped spur the negative trading.

JPMorgan, Deutsche Bank and Collins Stewart all slashed ratings on the telecom early Monday. Financing pressures and operational risks were behind the moves. The company said Friday it would have to raise more capital to build a faster data network. It also said it would halt sales of gear running on Clearwire's (CLWR) network.

Sprint shares, after an initial gain, ended Friday with a decline of 20%. 

There were no premarket trades yet for Clearwire, but shares closed 32% lower on Friday.

Other analyst actions ahead of Monday's bell included a Ticonderoga upgrade of fertilizer maker Potash (POT) to Buy from Neutral. Many analysts have been long-term bullish about the agricultural sector, as food demand will grow along with world population.

Potash shares plunged nearly 26% last month, but are up 3.5% so far in October. Wall Street expects 2011 to wrap up with an earnings gain of 83%. 

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