Stock futures pointed to a higher open Tuesday as better-than-expected results from Johnson & Johnson and a major deal in the airline industry helped to offset worries about other weak corporate earnings, climbing oil prices and inflation pressures.
About an hour before the market open, Nasdaq and S&P futures were higher, suggesting a positive start for Wall Street.
Drug and consumer products maker Johnson & Johnson, a Dow component, reported a jump in earnings and sales for the first quarter, as it topped analyst expectations. It also nudged its full-year guidance higher, confirming current forecasts.
A number of smaller banks that reported results early Tuesday - US Bancorp (USB, Fortune 500), State Street (STT, Fortune 500), Northern Trust (NTRS, Fortune 500) and M&T Bank (MTB, Fortune 500) - all reported improved earnings that beat forecasts. Brokerage firm Charles Schwab (SCHW, Fortune 500) and Commerce Bancshares (CBSH) are also set to report before the market open.
But investors are bracing for weak earnings from Washington Mutual (WM, Fortune 500), which is due to report after the market close. Analysts are forecasting that the nation's largest thrift, one of the major mortgage lenders, swung to a loss in the first quarter.
More bad news from the mortgage and real estate market came early Tuesday when foreclosure tracking service RealtyTrac reported that foreclosure filings jumped 57% in March compared with the same month last year and rose 5% from February, as the nation's housing market continues to deteriorate.
Late Monday, embattled brokerage firm Bear Stearns reported its profit plunged 79% in the fiscal first quarter that ended just two weeks before the threat of a bankruptcy filing forced its sale to JPMorgan Chase. The firm still managed to post a profit, although the results fell short of forecasts.
Outside of the financial sector, No. 1 chipmaker Intel (INTC, Fortune 500), also a Dow component, is set to report after the market close. The company is forecast to post a narrow gain in earnings per share.
Oil prices jumped to record-level highs. Light, sweet crude for May delivery rose to an all-time trading high of $133.66 a barrel in electronic trading, a day ahead of the government's weekly report on U.S. fuel inventories.
High oil and gasoline prices are expected to feed into higher inflation readings for March. The Labor Department reported the Producer Price Index, its key reading of inflation at the wholesale level, soared 1.1% last month, far more than the 0.6% rise forecast by economists surveyed by Briefing.com. But the so-called core PPI, which strips out volatile food and energy prices, rose only 0.2%, down from the 0.5% jump the previous month and in line with economists' forecasts.
The PPI report comes ahead of the even more closely watched reading on retail prices, the Consumer Price Index, due out Wednesday. Readings that show higher-than-expected price pressure could put a crimp in hopes that the Federal Reserve is ready to cut rates by a half-point or more going forward in an effort to deal with slowing economy.
Stocks fell Monday after Wachovia reported an unexpected quarterly loss and cut its dividend. The company also said it would raise $7 billion through a stock sale.
In major corporate news, Delta (DAL, Fortune 500) and Northwest (NWA, Fortune 500) announced a long-expected merger deal late Monday. The deal, if approved by regulators and shareholders, would create the world's largest airline and could lead to more consolidation in the sector. There are reports that Continental Airlines (CAL, Fortune 500) and United Airlines parent UAL Corp. (UAUA, Fortune 500) have already begun discussions on a possible deal.
But fears that consolidation could lead to higher fares and three mega-carriers controlling about 80% of U.S. air traffic could bring scrutiny of the deal from Congress. Airlines argue they need to cut costs to deal with soaring jet fuel prices, which are greatly outpacing fare increases and helped lead to three airline bankruptcies in the last month. But any savings from deals won't come until late this year at best and most likely not until 2009.
Still, Delta shares rose nearly 6% in early Frankfurt trading, while Northwest gained more than 4%. UAL shares also were higher in Frankfurt.
In global trade, most stocks in Asia closed higher, led by strong gains in Japan's Nikkei and the Shanghai composite index. Major markets in Europe also rose in afternoon trading