Stocks Set for Early Rally

The Lucent-Alcatel deal sets the market to open the second quarter on the up side.
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Stocks were headed for a higher open Monday as investors applauded some big M&A moves.

Dow Jones futures were pointing to a 38-point gain, while S&P 500 futures climbed 8.1 points and Nasdaq 100 futures rose 10 points. Crude oil rose 37 cents to $67 as worries about supply from Nigeria and Iran persisted.

Overseas, stocks rose. Japan's Nikkei rose 1.6% to its highest level since July 2000, adding 274 to 17,333. Hong Kong's Hang Seng rose 1.6% as well, adding 258 to 16,064. European stocks gained more modestly, with Britain's FTSE up 47 to 6011, the German Dax up 35 to 6005 and France's CAC up 29 to 5250.

France's

Alcatel

(ALA)

confirmed Sunday morning what wags on Wall Street spent the last week speculating about, a $13 billion buyout of

Lucent

(LU)

. The companies said the merged entity will be based in Paris, be headed by Lucent chief Pat Russo and fire many more workers, though they haven't yet decided what the company will be called. The deal means there could be even more action than usual this week in names like

Nortel

(NT)

, still struggling to get its accounting right, and

Juniper

(JNPR) - Get Report

, confronted with slowing growth. Alcatel rose 6% in Paris.

Meanwhile

GM

(GM) - Get Report

is expected to announce the sale of a majority stake in its General Motors Acceptance Corp. financing arm Monday morning to investors led by hedge fund Cerberus Capital.

The New York Times

reported Sunday that the deal calls for Cerberus & Co. to fork over $8 billion in cash up front in a deal that could be worth as much as $14 billion over time. GM has been buffeted by developments in recent weeks, with the latest restructuring counting as progress but an apparent standoff at parts maker

Delphi

adding to financial worries.

On Saturday,

Wal-Mart

said same-store sales increased a sluggish 1.3% in March. The increase came in at the low end of Wal-Mart's expectations for a 1% to 3% gain. It's the Bentonville, Ark.-based retailer's lowest monthly same-store sales increase since April 2004,

The Wall Street Journal

noted. Wal-Mart blamed this year's later Easter.

The news comes as U.S. investors prepare to open the second quarter of 2006. On Friday, the Dow Jones Industrial Average lost 41.38 points, or 0.37%, to 11,109.32, while the S&P 500 was down 5.43 points, or 0.42%, to 1294.82. The Nasdaq Composite slipped 1.03 points, or 0.04%, to 2339.79. Nonetheless, the first three months of 2006 were kind to investors: The Dow rose 3.65%, while the S&P 500 added 3.72% and the Nasdaq jumped 6.09%. The Dow and the Nasdaq had their best first quarters since 2002. For the S&P, the gain was even more impressive, as the index had its strongest first quarter since 1999.

For last week, however, the Dow fell 1.51%, and the S&P 500 lost 0.61%. The Nasdaq managed to gain 1.17%. Rising bond yields have sapped the market's momentum of late. At current levels, the yield on the 10-year Treasury note is at its highest point since June 2004, as traders have fretted that strong economic data will prevent the Federal Reserve from halting its rate-tightening campaign. On Monday, the 10-year Treasury bond was unchanged in price to yield 4.86%, while the dollar was higher against the yen and euro.

To view Frank Curzio's video take on today's market, click here

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