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US STOCKS-Futures point to higher open after bin Laden death

Published 05/02/2011, 09:07 AM
Updated 05/02/2011, 09:12 AM
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* Crude oil falls, energy shares may be pressured

* Teva to buy Cephalon, Community Health raises Tenet bid

* Indexes up: Dow 77 pts, S&P 7.6 pts, Nasdaq 12.25 pts (Updates prices)

By Ryan Vlastelica

NEW YORK, May 2 (Reuters) - U.S. stock index futures pointed to a higher open on Monday following confirmation Al Qaeda leader Osama bin Laden was killed by U.S. forces, indicating investors are set to strip some of the risk premium underpinning risky asset prices.

The dollar edged higher while U.S. crude oil futures dropped 1.5 percent after bin Laden, the mastermind behind the Sept. 11, 2001 attacks, was killed in a helicopter raid on a mansion near the Pakistani capital Islamabad. Brent crude was down 1.6 percent.

Markets have been buffeted in recent months as tensions in the oil-producing Middle East region sparked concerns about the risk to supplies and the global economy.

"This is a great story for freedom lovers, but it will only impact the economy insofar as it brings the price of oil down," said Christian Wagner, chief executive officer at Longview Capital Management in Wilmington, Delaware. "Energy stocks could experience some pressure today, albeit on the back of some record earnings."

Wagner saw the lift as temporary, saying new geopolitical tensions could arise as factions take advantage of the new power vacuum in the terrorist network.

"If earnings continue to do well then I wouldn't go so far as to say that we'll see a pullback in the coming days. But there will be increased concerns about the region contributing to market movement," he said.

Merger and acquisition activity added to the market's positive tone. Teva Pharmaceuticals Industries Ltd plans to buy Cephalon Inc for $6.8 billion, while Community Health Systems Inc raised its bid for Tenet Healthcare Corp by $1.75 per share to $7.25.

U.S.-listed shares of Teva rose 3.2 percent to $47.20 in premarket trading, while Cephalon gained 5.5 percent to $81.26. Tenet fell 7.1 percent to $6.44 before the bell.

In addition, Arch Coal Inc plans to buy International Coal Group Inc for $3.4 billion. Arch slid 3 percent to $33.27, while International Coal gained 31 percent to $14.46.

S&P 500 futures rose 7.6 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 added 77 points, and Nasdaq 100 futures put on 12.25 points.

The Dow and Nasdaq recorded their best month since December in April, and major U.S. indexes also hit new yearly highs last week on the back of strong corporate results.

Among Monday's earnings Humana Inc reported a rise in first-quarter profit and sales, while conglomerate Loews Corp's earnings missed expectations.

Economic indicators on tap for Monday included March construction spending data and the Institute for Supply Management's April manufacturing report, which is seen dropping to 59.9 from 61.2 a month earlier. Both datapoints are due at 10:00 a.m. EST

Warren Buffett, the chairman of Berkshire Hathaway Inc, still believes his reputation is intact despite a former top lieutenant buying shares in Lubrizol Corp before pitching a takeover of the chemicals company. Class B Berkshire shares fell 0.9 percent in premarket trading.

Speaking at Berkshire's annual meeting, Buffett remained bullish on the American economy and said it was not a credit risk.

On Friday, U.S. stocks rose on strength from Caterpillar Inc and other industrials, though weakness in Microsoft Corp limited the Nasdaq's rise.

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