Market Preview: Who Still Wants QE3?

The stock is one of the best performers in the Dow this year, rising nearly 23%, though it's pulled back a bit in the last week since hitting a 52-week high of $48 on Oct. 18. Merck has an eight-quarter streak of beating Wall Street's profit expectations on the line.

The sell side is only mildly bullish on the stock with 11 of the 21 analysts covering Merck at either strong buy (5) or buy (6) and the remainder at hold. The 12-month median price target is $48 vs. Thursday's close at $46.30, but the valuation isn't all that stretched with shares trading at a forward price-to-earnings multiple of 12.4X vs. 13.8X for the S&P 500.

The problem for Merck remains stagnation on the top line as an in-line revenue performance this quarter would represent declines from its total of $12.31 billion in the second quarter and $12.02 billion in the same period a year earlier.

Other early reporters include American Axle & Manufacturing (AXL), Arch Coal (ACI), Comcast Corp. (CMCSA), Coventry Health Care (CVH), Entrecom Communications (ETM), Goodyear Tire (GT), Graham Corp. (GHM), Immunogen (IMGN), Interpublic Group (IPG), Kaydon (KDN), KKR (KKR), Lear Corp. (LEA), Legg Mason (LM), LifePoint Hospitals (LPNT), Magellan Health Services (MGLN), Moody's Corp. (MCO), Newell Rubbermaid (NWL), Oppenheimer Holdings (OPY), Pilgrim's Pride (PPC), Radware (RDWR), Rockwell Collins (COL), Starwood Financial (SFI), TASER International (TASR), and Weyerhaeuser (WY).

The big piece of economic data due Friday morning is the advance estimate of gross domestic product for the third quarter, slated for release at 8:30 a.m. ET. The consensus estimate is for growth of 1.9%, up from 1.3% in the second quarter, according to Briefing.com, whose own projection is a less optimistic 0.8%.

Paul Ashworth, chief North American economist at Capital Economics, is expecting annualized growth to remain flat with the 1.3% pace seen in the second quarter.

"Consumption growth appears to have accelerated and residential investment appears to have been strong. Judging by the rebound in State and local government employment, the public sector may also have contributed positively to growth. However, it appears that business investment actually contracted slightly," he said. "Net trade was probably a small drag on GDP growth too. Finally, inventories were probably a big drag."

Ashworth said he believes the risks to the firm's forecast are on the downside and cited Thursday's durable goods data as further evidence of that.

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