Stock futures mixed after big jump a day earlier; reports from Microsoft, Amazon curb gains

By Sara Lepro, AP
Friday, July 24, 2009

US stock futures mixed after prior day’s big jump

NEW YORK — U.S. stock futures are paring early gains as investors struggle to keep the market’s recent momentum going amid disappointing reports from Microsoft Corp. and Inc.

Initially, futures moved higher, buoyed by gains in overseas markets that came after Wall Street’s stunning advance Thursday in which the Dow Jones industrials jumped almost 190 points to their first close above the 9,000 mark since early January.

But futures are now trading mixed in a narrow range as some discouraging earnings news weighs on investors.

Microsoft shares dropped more than 7 percent in premarket trading Friday after the tech giant said late Thursday that its revenue fell short of analysts’ expectations. also reported weaker-than-expected sales, and its shares fell more than 5 percent ahead of the opening Friday.

Analysts note that companies have been able to report better-than-expected earnings in large part because of aggressive cost-cutting measures, not stronger sales. Revenue is still sagging as consumers forgo spending to shore up their savings amid the ongoing recession.

On Thursday, investors rallied around news that existing home sales rose in June for the third straight month and by more than economists had expected. More solid earnings reports and forecasts from companies, including Ford Motor Co., added to the market’s optimism.

In just nine days, both the Dow and the Standard & Poor’s 500 index have climbed 11 percent as the bulk of companies’ earnings surpass Wall Street’s estimates. The reports have served as confirmation for investors that the economy is indeed improving and that a turnaround is possible by the end of this year.

Such hopes had carried the market up as much as 40 percent this spring, but that rally fizzled last month as still growing unemployment and weak consumer confidence fed doubts about the economy’s recovery.

Analysts warn there are still many obstacles that could threaten the market’s recent advance. Many retailers have yet to report their quarterly results, and unemployment, which affects so many facets of the economy, is projected to reach 10 percent this year.

Ahead of the market’s open, Dow Jones industrial average futures are up 14, or 0.2 percent, to 9,005, while Standard & Poor’s 500 index futures are up 0.60, or 0.1 percent, to 969.50. Nasdaq 100 index futures slipped 1.50, or 0.1 percent, to 1,582.50.

Bond prices were mixed in early trading. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 3.66 percent from 3.67 percent late Thursday.

Among the day’s earnings news, Schlumberger Ltd., the world’s largest oilfield services company, said its second-quarter earnings dropped 57 percent as oil and natural gas companies scaled back their exploration and drilling activities. But excluding one-time items, the company beat Wall Street’s expectations. Shares slipped 81 cents to $56.96 in premarket trading.

Microsoft shares fell $1.80 to $23.76, while shares dropped $5.36 to $88.51.

CIT Group Inc. was back in focus Friday. The troubled commercial lender said it is amending the terms of a tender offer for its notes and warned it may have to seek bankruptcy protection if enough bondholders don’t agree to the new terms.

The company said in a regulatory filing Friday that if the offer is successful it won’t file for bankruptcy and will pursue a restructuring through other unspecified ways.

Earlier this week, news that bondholders had come to the rescue of the lender helped lift markets.

The dollar was mixed against other major currencies, while gold prices hovered around $950 an ounce.

Oil prices inched higher in premarket trading on the New York Mercantile Exchange, rising 13 cents to $67.29 a barrel.

Overseas, Japan’s Nikkei stock average jumped 1.6 percent, while Hong Kong’s Hang Seng index gained 0.8 percent. The Hang Seng stands at its highest level in 10 months. In afternoon trading in Europe, Britain’s FTSE 100 rose 0.5 percent, Germany’s DAX index slipped 0.1 percent, and France’s CAC-40 added 0.2 percent.

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