U.S. futures extend gains on bailout view; Genentech jumps

U.S. stock futures extend rally on bailout hopes

By Steve Goldstein, MarketWatch

Last Update: 7:09 AM ET Feb 25, 2008

LONDON (MarketWatch) — U.S. stock futures on Monday extended the last session’s
rally on hopes of an imminent bailout of troubled bond insurer Ambac Financial,
with Genentech set to gain after the biotech won surprise backing for use of a
cancer drug.

S&P 500 futures rose 2.8 points to 1,358.30 and Nasdaq 100 futures edged up 1.25
points to 1,782.25. Dow industrial futures added 26 points.

U.S. stocks ended higher on Friday, with hopes that several big banks will soon
announce a bailout of bond insurer Ambac Financial (ABK) driving gains. The Dow
industrials ended up 96 points, the S&P 500 rose 10 points and the Nasdaq
Composite rose 3 points.

That rally carried over to international markets, with the FTSE 100 up 1.7% in
London and the Nikkei 225 jumping 3.1% in Tokyo.

The dollar improved 0.6% against the low-yielding Japanese yen, a further sign of
increased willingness on the part of investors to take risks.

Yields on 10-year Treasury bonds edged slightly higher to 3.84%. Oil futures fell
23 cents to $98.58 a barrel, while gold futures edged $1.10 higher to $948.90 an
ounce.

The housing market will be back in the spotlight with home improvement chain
Lowe’s Companies (LOW) reporting a 33% profit fall amid “challenging” conditions,
and, at 10 a.m., data on existing-home sales for January.

Dimitry Fleming, an economist at ING in Amsterdam, noted that since the end of
the summer, the traditionally close link between pending-home sales and
existing-home sales has become less tight.

“People walking away from the buying process after signing a contract seems to be
the obvious reason for this disconnect. Maybe they got cold feet, but given the
timing of the start of the divergence (the outbreak of the credit crunch) and the
cost of running away, it is more likely that people simply failed to secure
funding,” he said. He expects home prices to fall much further, which will put
pressure on the Fed to cut another half-point from its key rate level in March.

Speeches will come from Federal Reserve Governors Randall Kroszner and Frederic
Mishkin as well as European Central Bank President Jean-Claude Trichet, and there
are auctions of two- and five-year Treasury notes.

Genentech (DNA) surged 10% in Frankfurt after the U.S. Food and Drug
Administration granted an accelerated approval for Avastin, in combination with
paclitaxel chemotherapy, for the treatment of patients who have not received
chemotherapy for their metastatic breast cancer.

Analysts were surprised by the decision. “We believed there was only a 40% chance
of FDA approval given the tone of the (Oncology Drugs Advisory Committee) panel
proceedings in December of 2007. This positive news means that Genentech now
regains the key Avastin growth driver for 2008,” said Michael King, an analyst at
Rodman & Renshaw who upgraded the stock to market outperform from market perform.

Electronic Arts Inc. (ERTS) on Sunday unveiled a $2 billion unsolicited bid to
buy Take-Two Interactive Software Inc. (TTWO) — its second offer in recent
weeks, and one that again was rebuffed by the maker of Grand Theft Auto video
games. Take Two surged 44% to $25 in pre-open deals.

Deutsche Bank lowered ratings for General Motors (GM) and BorgWarner (BWA),
sending both to hold from buy on fears the cyclical North American downturn could
be deeper and more protracted than previously expected. GM slipped 2%.

Visa said it could raise up to $18.76 billion in an initial public offering,
adding it was ahead of MasterCard (MA) and American Express (AXP) in terms of
dollar volume and transactions in 2006.

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