Futures surge as Microsoft aims to buy Yahoo
By Caroline Valetkevitch
Stock index futures jumped on Friday as investors cheered Microsoft Corp's (MSFT.O) proposed $44 billion acquisition of Internet media company Yahoo Inc (YHOO.O).
In the financial sector, shares of MBIA Inc (MBI.N) rose 14.2 percent to $17.70 before the bell after a report on CNBC television that eight banks were forming a consortium to seek a rescue plan for bond insurers. Ambac Financial Group Inc (ABK.N) rose 11.7 percent to $13 in pre-market trading.
But investors remained anxious about a Labor Department report on January employment due at 8:30 a.m.
With merger action mostly dormant since summer, news of the planned Microsoft deal on Friday sent stock futures soaring.
"Especially in a distressed market, if you get a financial deal or a technology deal, that's really going to captivate the market, and that's what you've got right now," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut.
S&P 500 futures were up 16.50 points, well above fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.
Dow Jones industrial average futures were up 154 points. Nasdaq 100 futures were up 25 points.
Software maker Microsoft said it offered to buy Yahoo in a cash and stock deal valued at $44.6 billion. Microsoft offered to buy Yahoo for $31 per share, a 62 percent premium over Yahoo's closing stock price on Nasdaq Thursday. Yahoo shares jumped to $30.75 in trading before the bell. Microsoft shares fell 2.2 percent to $31.89.
Yahoo was not immediately available for comment.
Web search company Google Inc (GOOG.O) reported revenue and profit that missed Wall Street's estimates late on Thursday.
Shares of Google traded lower before the bell, edging down an additional 1.7 percent after it slumped 6.5 percent late on Thursday.
Economists polled by Reuters expect the department data to show, on average, non-farm payrolls rose by 80,000 last month.
"A really bad employment report could knock the steam out of this market," Mendelsohn said. But, "you could easily have a 200- to 300-point up day if you have a good labor report. As long as we're over 50,000 (in job creation), it should have a positive impact on the market."
(Additional reporting by Kristina Cooke; Editing by Kenneth Barry)
Copyright © 2008 Reuters Limited.