Futures fly higher on retail sales

NEW YORK (CNNMoney.com) -- Stocks were poised for a big start on talk of a new round of airline mergers and a strong reading on spending by consumers.

Stock futures, which predict the direction of stocks at the open, were higher in early trading after retail sales experienced a strong surge in the crucial holiday shopping month of November.

Shoppers flocked to malls last month in search of juicy deals on clothes, toys and electronics. The Commerce Department reported that overall retail sales jumped a much stronger-than-expected 1 percent last month, compared with a revised 0.4 percent decline in the prior month. Retail sales last month were originally reported to have slipped 0.2 percent in October.

In other news, United Airlines parent UAL (Charts) is reportedly in talks about a possible acquisition of Continental Airlines (Charts). Bankrupt Northwest Airlines can block any deal for Continental though, by right of the so-called "golden share" it holds in Continental.

The talks come as Delta Air Lines management is set to meet with its creditors Wednesday to urge them not to back a hostile $8 billion bid for that airline by US Airways (Charts). The Wall Street Journal reports that United management has also contacted Delta and its creditors about a possible deal.

And smaller low-fare carrier AirTran Holdings (Charts) announced early Wednesday it is offering to buy rival Midwest Air Group (Charts) for just over $200 million, a 24 percent premium from Midwest Air's closing price Tuesday. But Midwest has rebuffed the offer, according to AirTran.

In other corporate news, General Electric (Charts) raised its dividend by 12 percent after hours Tuesday, but it also gave 2007 earnings guidance that was below analysts' consensus forecasts. Shares of the Dow component still edged narrowly higher on the dividend news and gained 1 percent in Frankfurt trading early Wednesday.

At 10:30 a.m. will come a reading on U.S. fuel inventories. Oil prices were lower ahead of the inventory report. U.S. crude slipped 9 cents to $60.93 a barrel in electronic trading. Brent crude futures lost 29 cents to $61.23 in London.

Treasury prices were slightly higher, taking the yield to 4.47 percent from 4.48 percent late Tuesday. Treasurys rallied Tuesday after the Federal Reserve left rates unchanged and cited a "substantial" cooling in the housing market, raising the hope of interest rate cuts next year.

The dollar was higher against the euro and the yen.

Stocks in Asia closed mostly higher Wednesday. Shares of Australian airline Qantas fell after its board rejected an $8.6 billion takeover offer from U.S. private equity firms. Stocks in Europe also were higher in early trading.

More market news and futures ahead of the U.S. open