Wall St to open higher after drop on retail sales boost

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks were set for a bounce on Tuesday, a day after the S&P 500 suffered its biggest drop in two months, after solid retail sales data and as investors digested earnings from JPMorgan and Wells Fargo.

Futures received a boost after data showed retail sales excluding automobiles, gasoline, building materials and food services, increased 0.7 percent last month after a 0.2 percent rise in November.

"It's conducive to the growth story that is becoming increasing popular," said Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Massachusetts.

"From an economic perspective, the real economy continues to gain traction, but from a market perspective the stronger the economy looks the more we need to look and see whether in fact the Fed might be pulling back sooner than people think."

 

The first of the large banks to post quarterly earnings yielded mixed results. JPMorgan Chase & Co edged up 0.7 percent to $58.10 in choppy premarket trading after posting quarterly earnings. Wells Fargo fell 0.5 percent to $45.34 after results.

As the Federal Reserve begins winding down its stimulus, which was largely responsible for the 29.6 percent climb in the S&P 500 last year, investors may be forced to become more selective about stock valuations. The forward price-to-earnings ratio for the index is the highest in nearly seven years.

The benchmark S&P index fell 1.3 percent on Monday, its worst decline November 7, as investors exercised caution amid mounting negative corporate outlooks.

Almost 10 of every 11 earnings pre-announcements for the current earnings season from S&P 500 companies have lowered estimates, according to Thomson Reuters data, which would be the lowest on record if it continues.

Later in the week, Bank of America Corp , Citigroup Inc , Goldman Sachs and Morgan Stanley are among the financial companies scheduled to post results.

S&P 500 futures rose 4.4 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 29 points and Nasdaq 100 futures added 9.5 points.

Stratasys Ltd dropped 4.3 percent to $124.42 before the opening bell after the 3D printer maker, estimated full-year adjusted profit way below Wall Street estimates, as it warned expenses would rise significantly in 2014.

GameStop Corp tumbled 13.5 percent to $39.20 in premarket trade after the video game retailer forecast fourth-quarter profit below analysts' estimates.

But Intuitive Surgical advanced 11.7 percent to $439 before the opening bell after the surgical equipment maker gave its fourth-quarter and full-year 2013 outlook.

Merger activity continues to be lively. Google Inc gained 1.2 percent to $1,136 in premarket trade after the world's largest online search engine announced late Monday a $3.2 billion deal to buy smart thermostat and smoke alarm maker Nest Labs Inc.

Charter Communications Inc on Monday formally offered to acquire larger rival Time Warner Cable for $37.3 billion, sparking what is likely to be a contentious battle to control the No. 2 U.S. cable operator. Time Warner gained 2 percent to $134.99 before the opening bell.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)