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Tech sector set to lift Wall Street

Business Materials 21 December 2007 20:47 (UTC +04:00)

( FT ) - Wall Street stocks were set for a higher start on Friday after strong results from Research in Motion (NASDAQ:RIMM) looked set to lift the technology sector and on reports that Merrill Lynch may get a multi-billion dollar capital infusion from Singapore.

Less than an hour before the opening bell, S& P 500 futures were up 10.5 points at 1485. Nasdaq futures up 15 points at 2,113.50 while futures for the Dow Jones Industrial Average were up 74 points at 13,424.

Merrill Lynch is in "preliminary" talks with Temasek Holdings, Singapore's state investment arm, about a large capital injection, the FT reported on Friday.

Merrill could benefit from a boost to its balance sheet after it took $8.4bn in writedowns in October, which lead to the departure of Stan O'Neal, chief executive. The shares were up 1.7 per cent at $55.45 in pre-market trading

The move would mark the latest in a series of efforts by US banks to shore up their finances with capital from abroad after similar moves by Citigroup, UBS and Morgan Stanley.

Confirming the scale of problems facing US financial companies KeyCorp (NYSE:KEY), the US regional bank, warned it expects a loss of up to 5 cents a share in the fourth quarter because of residential and commercial real estate loan losses. Analysts had expected a 64 cents-a-share profit.

The company expects net charge-offs of up to $120m for the period and said it planned to eliminate more than 1000 jobs.

However there was better news from Research In Motion, maker of the BlackBerry email device, which said third quarter net income more than doubled to $370.5m while revenues doubled to $1.67bn.

The companys ' upbeat fourth quarter guidance exceeded analysts' estimates and the shares were up 12 per cent in the pre-market. UBS raised its price target to $155.

Another tech firm Red Hat (NASDAQ:RHAT), an open source software provider, increased third-quarter earnings more than expected and the company appointed a new chief executive.

In the retail sector Circuit City Stores (NYSE:CC), the struggling consumer electronics vendor, reported a wider-than-expected $207.3m loss for the third quarter while revenues fell 3 per cent and same-store sales declined 5.5 per cent. The shares plummeted 21 per cent in the pre-market.

European stocks posted solid gains ahead of the open on Wall Street. The FTSE Eurofirst 300 index rose 1.2 per cent while the FTSE 100 was up 1.3 per cent. Asian equity markets closed mainly higher, led by a 2.3 per cent jump on the Hang Seng .

Bond yields rose as prices declined. The yield on the two-year Treasury note edged up 3 basis points to 3.12 per cent while the 10-year Treasury note yield was 3bp firmer at 4.08 per cent.

The dollar fell slipped against major currencies early in New York. In overnight trade the dollar fell 0.1 per cent against the pound to $1.9850 and eased 0.2 per cent to $1.4363 against the euro

Crude oil prices were flat at $91.05-a-barrel.

Friday's economic news was led by news that a key measure of core inflation rose above the Federal Reserve's comfort zone for the first time since April.

The overall PCE price index rose 0.6 per cent in November, while the core rate, which excludes food and energy, rose 0.2 per cent to a 2.2 per cent annual rate, above the Fed's 2 per cent preferred upper level.

The data, coming soon after a sharp spike in consumer and producer prices, will add to pressure on the Fed to keep interest rates on hold.

"The Fed can no longer claim (as it did in the December policy statement) that readings on core inflation have improved," John Ryding , chief US economist at Bear Stearns, said. "Nonetheless, we still see the Fed cutting rates one last time for financial stability purposes in January, but this rate cut is by no means a done deal at this point.

Consumer spending proved resilient to economic headwinds, rising 1.1 per cent last month according to the Commerce Department, the biggest monthly rise since May 2004 and almost double the amount forecast by economists. However personal income rose only 0.4 per cent.

After the data was released bonds extended early losses while stock futures moved higher and the dollar was little changed.

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