Wall Street to dip on Europe GDP, but mergers may support

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By Rodrigo Campos | February 15, 2013 1:28 AM EST

Stocks were set to dip at the open Thursday, in the wake of weaker-than-expected growth data from Europe and Japan, though news on mergers and acquisitions may lead some investors to see further value in the market even after its recent gains.

Though weakness in Europe has persisted over recent quarters, its implications for global growth and U.S. corporate profits spurred some profit-taking on Wall Street.

A contraction of 0.6 percent in gross domestic product in the euro zone was the steepest for the bloc since the first quarter of 2009, while Japan's GDP shrank 0.1 percent in the fourth quarter, crushing expectations of a modest return to growth.

The S&P 500 has gained 6.6 percent so far this year, though a dearth of fresh incentives has kept trading thin over the past few sessions.

U.S. data showed the number of Americans filing new claims for unemployment benefits fell more than expected in the latest week.

That suggests the job market is improving, said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

"But it won't be much of a catalyst for the market this morning because of ... the news out of Europe," he said.

Cardillo said a weaker euro, down 0.8 percent versus the U.S. dollar, was also a downward pressure on markets.

Shrinking European economies translated to a 5-percent drop in revenue from the region for Cisco Systems , which nonetheless beat estimates as it reported its results Wednesday. The company's shares pared a more than 2 percent earlier decline to trade 0.6 percent lower before the bell.

General Motors Co reported a weaker-than-expected fourth-quarter profit on Thursday, also citing bigger losses in Europe alongside lower prices in its core North American market.

S&P 500 futures fell 4 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures fell 36 points, and Nasdaq 100 futures lost 9 points.

Merger and acquisition activity indicated investors saw value in the market even after its recent gains.

H.J. Heinz Co shares jumped 20 percent in premarket trading after it said that Warren Buffett's Berkshire Hathaway and 3G Capital will buy the company for $72.50 a share, or $28 billion including debt.

American Airlines and US Airways Group said they plan to merge in a deal that will form the world's biggest air carrier, with an equity valuation of about $11 billion. US Airways shares rose 3.5 percent in premarket trading.

Nvidia shares fell 2.5 percent in premarket trading after the chip maker's revenue outlook missed expectations on Wednesday, pointing to a slowing PC industry and slower production of tablets using its chips.

On the other hand, shares of the world's largest chip gear maker Applied Materials rose 2 percent premarket following a better-than-expected earnings report and outlook.

Best Buy shares fell 2.8 percent in premarket trading; sources said on Wednesday the electronics retailer's founder may scrap a buyout bid and instead line up investors to take a minority position.

U.S. stocks closed little changed in light trading Wednesday, as investors remained cautious after the S&P 500 index hit its highest intraday level since November 2007.

(Additional reporting by Angela Moon; Editing by Bernadette Baum)

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