Stocks Head to Higher Open

Stocks were poised to open higher Monday after several reports of potential corporate deals, including speculation Washington Mutual Inc. will get a $5 billion investment from private equity firms.

The nation's largest thrift is in talks with buyout shop TPG Inc. about a possible capital injection, according to The Wall Street Journal. The company, which has suffered big losses tied to subprime mortgages, would become the latest U.S. financial institution to reach such a deal.

In addition, Microsoft Corp. gave Yahoo Inc. a three week deadline to agree to a takeover, or Microsoft would launch a proxy fight for control of the company. Yahoo said Monday the deal isn't in the best interests of its shareholders, and called the proxy threat counterproductive.

And Swiss pharmaceutical maker Novartis AG said it will spend about $38 billion in a two-step bid for a majority stake in U.S. eye-care company Alcon Inc.

Earnings season unofficially begins after the closing bell when Alcoa Inc., the world's third-largest aluminum producer, is scheduled to release first-quarter results.

Dow Jones industrial average futures rose 69, or 0.70 percent, to 12,679. Standard & Poor's 500 index futures advanced 11.90, or 0.87 percent, to 1,383.80. Nasdaq 100 index futures rose 15.75, or 0.84 percent, to 1,885.50.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.52 percent from 3.47 percent late Wednesday.

Light, sweet crude rose $1.16 to $107.39 in premarket electronic trading on the New York Mercantile Exchange. Gold was higher, and the dollar was mixed against other major currencies.

There were no major economic reports scheduled to be released during the session.

Overseas, Japan's Nikkei stock average rose 1.18 percent. Britain's FTSE 100 added 0.95 percent, Germany's DAX index rose 0.32 percent, and France's CAC-40 added 1.13 percent.

McDonald's February Sales

McDonald's Corp. said Monday that February sales at restaurants open more than a year jumped a better-than-expected 11.7 percent, boosted by growth in Europe, the weak dollar and the benefit of an extra selling day this year.

Two straight months of solid results to start the year have reassured investors worried about the impact of the economic slowdown on the world's largest fast-food chain, among other restaurant companies.

McDonald's shares increased $1.11, or 2.1 percent, to $53.38 in morning trading.

The leap year boosted same-store sales by about 4 percent last month, the Oak Brook-based company said.

Same-store sales in the U.S. rose 8.3 percent during the month ending Feb. 29, led by breakfast and coffee offerings. European same-store sales grew by an impressive 15.4 percent on strong results in the U.K., France, Germany and Russia.

Same-store sales in the Asia Pacific region, Middle East and Africa rose 10.9 percent for the month, mostly on strength in Australia, China and Japan.

Systemwide sales, which include restaurants owned by franchisees and affiliates operating under joint-venture agreements rose 13.2 percent in February.

Goldman Sachs analyst Steven Kron said McDonald's is well-positioned to navigate through economic challenges because of its tiered menu platform which offers a mix of value and more expensive new products.

Paul Westra of Cowen and Co. said he is hearing positive feedback from the rollout of McDonald's specialty coffees, now available in more than 1,000 U.S. restaurants en route to being in all of them by mid-2009.

"We strongly believe that February's solid results were positively impacted by the rollout of its two Southern-style chicken sandwiches (breakfast and lunch sandwiches) ahead of a likely spring 2008 media launch. This fact bodes well" for a strong second quarter, he said in a note to investors.

U.S. stocks brace for more volatility next week

U.S. stocks are poised for more volatility and losses next week, with investors digesting the past week's turbulence, including further evidence suggesting that the U.S. economy is in recession and that the credit crisis shows no signs of abating.

The past week saw an acceleration of the troubles in credit markets, where investors find it increasingly hard to assign value to debt instruments as a result of the bad loans that have surfaced on the balance sheets of financial institutions worldwide.

"We can be sure that this won't go away anytime soon," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank. "We'll see more news of banks having trouble raising capital and more news pointing to the fact that we're in a recession."

Stocks took another hit on Friday after news that the U.S. economy lost 63,000 jobs in February, the largest drop since March 2003 and marking the second drop in a row in monthly employment.

The Dow Jones Industrial Average (DJI:^DJI) lost 146 points, or 1.2%, to end at (DJI:^DJI) 11,893, capping a 2.8% weekly decline.

The S&P 500 Index fell 10.97 points to 1,293.37, down 2.8% on the week, while the Nasdaq Composite Index (COMP) shed 8.01 points to 2,212.49, off 2.6% on the week.

The Federal Reserve also intervened to boost liquidity ahead of the jobs report, somewhat cushioning its impact. Credit markets also had become increasingly volatile since earlier in the week, after a default at mortgage lender Thornburg Mortgage Inc. (NYSE:TMA) and a litany of other problems at other financial institutions.

Financials stocks ended Friday's session mixed with Citigroup Inc. (NYSE:C) off 1.3%, while J.P. Morgan Chase (NYSE:JPM) was up 0.5%, and American Express Co. (NYSE:AXP) 0.6% higher.

"Friday's market action is not going to satisfy anybody," said Ken Tower, chief market strategist at Covered Bridge Tactical. "The bulls did not get the recovery they'd hoped, and the bears did not get the collapse they wanted to get. There will be a lot of uncertainty and disgruntlement over the weekend."

Following the jobs report, market odds that the Federal Reserve will cut interest rates by 75 basis points in March jumped to 96%. The move would bring the central bank's key rate to 2.25%.

Investors next week will sift through more data that could point to economic weakness, though the first three trading sessions of the week will be relatively light on indicators.

On Thursday, February retail sales, weekly jobless claims, January business inventories and import prices for last month will be released.

Friday will bring a consumer-sentiment survey and the key consumer-price index for February, which will be watched closely for signs of inflation.

Commodities continued their rally over the past week. Crude futures touched a record high of $106.54 Friday.

The dollar dropped to a new low against the euro Friday, with the European currency hitting $1.5463. A weaker dollar makes dollar-denominated commodities, such as oil, less expensive for buyers holding other currencies.

Among key reasons cited by traders for the continued surge are that investors fleeing dollar-denominated assets are increasingly turning to commodities to seek a safe haven.
Other beneficiaries of market turmoil have been Treasury bonds, which typically serve as a safe haven.

Some analysts believe that the current trends in U.S. markets will continue until the global economy also gets hit, which would force other central banks to also cut interest rates, putting pressure on their currencies.

But U.S. stocks could take an even turn for the worst once this happens, according to Joshua Rosner, analyst at Graham Fisher, as current dollar weakness has provided support in making dollar-denominated assets more attractive. "Once foreign central banks start to cut rates and the dollar strengthens relative to those foreign currencies, we are likely to see capital flight from our equity markets," he wrote in a note.

Among profit reports of interest next week, will be Texas Instruments Inc. (NYSE:TXN) , which reports on Monday along with Blackstone Group (NYSE:BX) , Foot Locker (NYSE:FL) and Hovnanian Enterprises Inc. (NYSE:HOV)