U.S. stocks looked to open lower on Monday as oil prices rose to their highest in nearly a month, increasing concern about the impact on corporate profits. Meanwhile, investors were on edge ahead of an expected interest rate rise on Tuesday, with the U.S. Federal Reserve expected to raise interest rates by 25 basis points. NYMEX crude oil futures surged above $46 a barrel on Monday after Russia's YUKOS suspended some oil exports to China and on nagging fears over storm-related disruptions to U.S. oil inventories. Oil companies worked at the weekend to restore crude and gas production in the Gulf of Mexico, and refineries on the U.S. Gulf Coast brought operations back slowly after Hurricane Ivan passed through. High oil prices generally have a dampening impact on stocks because of their impact on corporate profit margins and consumer wealth.
Companies were also staring at higher borrowing costs, with the Federal expected to following rate rises in June and August by hiking rates to 1.75 percent. "There's always a certain amount of pre-Fed nervousness," said Jeremy Batstone, director of private client research, at Charles Stanley in London. More important for the market is what the Fed signals on policy after this month, as recent weak data has raised doubts over the strength of the U.S. economy. "There's a general perception the Fed will raise rates by another quarter percentage point. I personally think that they don't have to do too much. Although there's evidence of inflationary pressure around, there's not a huge amount of evidence," said Batstone. Stocks ended higher on Friday after Ford Motor Co. raised its earnings forecasts but gains on the Nasdaq were checked after wireless technology provider Qualcomm Inc. said an accounting review may reduce pretax income. The Dow Jones industrial average <.DJI> was up 39.97 points, or 0.39 percent, at 10,284.46. The Standard & Poor's 500 Index <.SPX> was up 5.05 points, or 0.45 percent, at 1,128.55. The technology-laced Nasdaq Composite Index <.IXIC> was up 6.01 points, or 0.32 percent, at 1,910.09. On Monday morning, S&P 500 futures were slightly lower, standing about 3 points below fair value accounting for dividends, interest rates and time to expiration on the contract, pointing to a fall at the open. Among companies which could move is Nike Inc. , the world's largest athletic shoe company, which reports first quarter results before the bell, and software maker Adobe Systems which reports after the bell. Home builder Lennar Corp. on Monday reported a 12 percent rise in quarterly profit as revenue from home sales increased.
Other stocks in focus include telecom provider MCI Inc. , after the New York Times reported that the company which has just emerged from the largest bankruptcy in U.S. history in April, has quietly begun to search for potential buyers. The market will also focus on the banking sector with a clutch of investment banks reporting results this week. Goldman Sachs and Lehman Bros announce quarterly numbers on Tuesday, followed by Morgan Stanley and Bear Stearns on Wednesday. Investors are also cautious as the U.S. enters the pre-announcement season when companies say if they will fail or beat earnings expectations.////