The Lowdown
A global rally and the promise of easier lending has traders feeling bullish before the opening bell.
After a wild week that featured superlative swings but left the Dow Jones Industrial Average higher, stocks looked to post early gains ahead of a speech by Federal Reserve Chairman Ben Bernanke on the economy. Shortly before 9 a.m., Dow, Nasdaq and S&P 500 futures were trading well above fair value.
A loosening of the credit markets helped spur early enthusiasm. Treasury prices eased after moves by two foreign governments to shore up their financial sectors. In Europe, Netherlands promised to pump $13.4 billion into ING after the firm warned it would post its first quarterly loss. In Asia, South Korea said it would guarantee as much as $100 billion in its banks' foreign debt.
In Washington, Bernanke plans to testify before a House panel at 10 a.m. Traders are likely to focus on his language for clues about upcoming changes in monetary policy.
In energy, oil prices rose after Chakib Khelil, the president of the Organization of Petroleum Exporting Countries, said the group plans to make a "substantial" supply cut at its next meeting, which is scheduled to begin Friday. By 8:20 a.m., crude oil traded up $1.76 at $73.61 a barrel.
In global markets, Hong Kong's Hang Seng index and Japan's Nikkei each finished with gains of more than 3.5%. In Europe, traders welcomed the ING bailout, as the major indexes of the Netherlands, Sweden, France, Norway and Britain each held gains in afternoon trading.
Corporate News
General Motors (GM: 6.68*, +0.26, +4.05%) and Chrysler are continuing to hold talks about a potential deal to join the two automakers, however conflicting reports paint a muddy picture of how the negotations are progressing. The Wall Street Journal reported the GM is having a difficult time tracking down private investors to fund the deal and its associated layoffs and contract buyouts. However, Reuters reported that negotiations "have intensified in recent days and are moving closer toward a conclusion." Each cited anonymous sources.
Exelon (EXC: 52.74*, -1.63, -2.99%) has offered to acquire NRG Energy (NRG: 24.02*, +4.72, +24.45%) in an all-stock deal worth $6.2 billion, or $26.43 a share. The buyout would create the nation's largest power company, the firm said. The effect on earnings and cash flow would be "immediate," Exelon Chairman and Chief Executive John W. Rowe said.
Yahoo (YHOO: 12.92*, +0.02, +0.15%) is planning sweeping cost cuts and a workforce reduction likely to exceed its January estimate of 1,000 layoffs, The Wall Street Journal reported, citing anonymous sources. The announcement could come as soon as Tuesday, when the firm is scheduled to release its third-quarter earnings report.
Merrill Lynch (MER: 18.57*, +0.47, +2.59%) Chief Executive John Thain predicts thousands of jobs will be lost when his firm is absorbed by Bank of America (BAC: 23.82*, +0.57, +2.45%), Bloomberg reported. However, the cuts are not likely to come from the firm's fixed income or commodities groups. Instead, jobs in finance, operations and information technology are on the block as part of the firms' promise to reduce their combined costs by $7 billion.
Hasbro (HAS: 30.49*, +0.26, +0.86%), the maker of Mr. Potato Head, posted a 14.4% decline in third-quarter profit but still topped analysts' estimates on strong sales of its Star Wars and Playskool toys. Meanwhile, Mattel (MAT: 14.23*, -0.23, -1.59%) posted a 0.5% increase in third-quarter net income on sales of its Fisher-Price and American Girl lines but missed Street estimates.
The Economy
The September reading of the Leading Index, a composite indicator for economic growth, is scheduled to be released Monday at 10 a.m. by the Conference Board. In August, the index fell 0.5%. For September, economists expect a 0.3% decline.
ReadMe
The New York Times Magazine on oil prices: Even with the recent decline, the cost of a barrel of oil has skyrocketed over the last six years. What's going on? And is it necessarily bad? STORY
Time on gasoline: Oil and gas prices are not always locked in step. Here's an explanation for the current disparity. STORY
BusinessWeek on the financial crisis: Who's fault is it? STORY
WatchMe
Reuters on oil and the consumer: Cheaper oil prices may signal weakness in demand, but they may ultimately benefit the economy. VIDEO
Bloomberg on the market's limbo contest: Eric Ross, the director of U.S. equity research at Canaccord Adams, offers his projection for how much lower stocks will go. VIDEO
Wall Street Crisis: Is Your Money Safe: Analysis of the volatile market with an eye toward investing. CNBC, 7 p.m.
