U.S. Stock Futures Up Broadly

By Dow Jones Business News, 
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By Saumya Vaishampayan and Tommy Stubbington

U.S. stock futures rose Monday, recovering after major stock indexes posted losses last week.

About 90 minutes ahead of the open, Dow Jones Industrial Average futures added 65 points, or 0.4%, to 16946.

S&P 500 index futures gained 7.3 points, or 0.4% to 1969.70 and Nasdaq-100 futures rose 19 points, or 0.5%, to 3916.50. Changes in stock futures don't always accurately predict stock moves after the opening bell.

U.S. stocks rose Friday, with the Dow adding 0.2% to 16943.81. The S&P 500 rose 0.1% to 1967.57. For the week, the S&P 500 and Nasdaq Composite dropped by the most since April, while the Dow posted its biggest weekly loss in a month.

U.S. stocks have pushed to records this year, propelling the Dow Industrials above 17000 for the first time, boosted in part by evidence of a labor-market recovery and low interest rates. But many investors say the next leg higher depends on the growth of corporate earnings. More than 50 companies in the S&P 500 are scheduled to report this week. Companies in the S&P 500 are expected to see earnings grow about 4.6% in the second quarter from a year earlier, according to FactSet.

"The reality is that equity valuations can only be sustained at these levels through increased earnings," said Rebecca O'Keeffe, head of investment at Interactive Investor, a U.K. stockbroker. "With equity market valuations at high levels...can earnings for individual companies live up to those high valuation expectations?"

The S&P 500 is trading at 15.6 times its expected earnings for the next 12 months. That is higher than the average of 13.9 for the past 10 years.

Last week, reports that a Portuguese bank missed some debt payments weighed on European stocks as investors worried about wider turbulence in the European banking sector.

But on Monday was little sign of the broad-based selloff seen last week that brought to mind the stormier episodes of Europe's debt crisis. Bond and stock markets that began to recover on Friday continued to climb Monday as investors felt reassured that the problems in Portugal's banking sector are just a blip in the region's recovery.

The Stoxx Europe 600 index rose 0.7%, clawing back part of last week's losses.

The euro inched 0.1% higher against the dollar to trade at $1.3625, boosted by the more buoyant tone in euro-zone bond markets.

In commodity markets, gold futures fell 1.4% to $1,319.30 an ounce, while crude-oil futures declined 0.4% to $ 100.46 a barrel.

Citigroup said Monday it agreed to pay $7 billion to settle allegations by the U.S. government about the quality of mortgages it sold leading up to the financial crisis. Shares rose 1.3% in premarket trade.

U.S. drug company AbbVie Inc. is nearing a deal to buy Dublin-based Shire PLC for more than 31 billion pounds ($53 billion). Shire said Monday it had received an altered offer of 53.20 pounds a share, marking the fifth takeover attempt by AbbVie. Shares of AbbVie fell 1.8% in premarket trade.

Write to Saumya Vaishampayan at Saumya.Vaishampayan@wsj.com


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