Stocks Set to Pop

Stocks were poised for a significant jump early Tuesday as the initial retail tallies from Christmas looked strong and traders searched for the heretofore elusive Santa Claus rally.

Index futures recently showed the S&P 500 trading 5 points above fair value, while the Nasdaq 100 was set for a 10-point gain. The 10-year Treasury bond fell 6/32 in price to yield 4.40%, just 2 basis points above the yield on the 2-year note, while the dollar rose against the yen and fell against the euro.

Crude continued to ease as bullish energy traders stood pat after a profitable 2005. In electronic Nymex trading, crude for February delivery was recently down 57 cents to $57.86 a barrel. Natural gas futures slid 84 cents to $11.44 per million British thermal units.

Overseas stocks were mixed, with Germany's Xetra DAX recently up 0.5% to 5444 and Japan's Nikkei down 0.9% to 15,969. Exchanges in London and Hong Kong remained closed for the holidays.

Stocks were narrowly mixed in the week before Christmas. For the year, the S&P 500 remains the best-performing of the three main indices, up about 4.6%. The Dow Jones Industrial Average is up 0.9% year to date while the Nasdaq Composite has risen 3.3%.

According to the International Council of Shopping Centers, major retailers are expected to report same-store sales gains for December of 3% to 3.5%, led by discounters and electronics retailers. Wal-Mart(WMT Quote - Cramer on WMT - Stock Picks) confirmed over the weekend that its December comps should rise in line with its previous estimate of 2% to 4% compared with a year ago.

The day's biggest stock market story could involve Guidant(GDT Quote - Cramer on GDT - Stock Picks), the pacemaker giant that is currently the subject of a takeover battle between Boston Scientific(BSC Quote - Cramer on BSC - Stock Picks) and Johnson & Johnson(JNJ Quote - Cramer on JNJ - Stock Picks). Citing consumer anxiety over device malfunctions, Guidant forecast fourth-quarter earnings of 17 cents to 23 cents a share on sales of $790 million to $820 million. Analysts had been expecting earnings of 49 cents a share on sales of $928.4 million.