Bulls still believe in Santa rally

NEW YORK (CNNMoney.com) -- The stock rally that has lifted indexes to near record or multi-year highs looks poised to get back on track Friday ahead after a key reading on inflation showed zero increase and a measure of business spending rose more than expected.

Stock futures, which predict the direction of stocks at the open, were up in early trading. Thursday stocks, which had been higher in morning trading, fell on a noon report from the Philadelphia Federal Reserve Bank that showed the strength of manufacturing in its region weaker than forecasts in December. But the so-called Santa Claus rally has lifted stocks so far this month and quarter.

Personal income rose by 0.3 percent in November while personal spending increased by 0.5 percent, the Commerce Department said.

While those numbers were slightly below estimates, the report also has a key inflation reading, which came in flat.

Economists surveyed by Briefing.com forecast that personal income rose 0.4 percent in November, the same as the rise in October, while spending by individuals was forecast to increase 0.6 percent after edging only 0.2 percent the previous month.

Orders for durable goods, watched as a measure of business spending, rose 1.9 percent in November. Economists were looking for a 1.5 percent gain.

At 10 a.m. ET the University of Michigan is set to report its revised reading on consumer confidence in December, which can determine consumers' willingness to spend, is forecast to remain at a 90.2 reading.

The major exchanges could see low trading volume Friday ahead of the three-day Christmas weekend, which could add to volatility for stocks if any of the reports buck expectations.

In corporate news, Research In Motion (Charts) reported a better than forecast gain in third-quarter profit and forecast an even stronger fourth quarter due to strong demand for its BlackBerry hand-held e-mail devices. Shares gained 6 percent in after-hours trading.

Qualcomm (Charts), a provider of microchips for mobile telephones, lowered its first-quarter profit forecast Thursday, citing higher legal costs and a deferred payment from a customer. Its shares fell 2 percent in after-hours trading.

Toyota Motor (Charts) released its production targets for 2007 as the Japanese automaker now appears poised to overtake General Motors (Charts) as the world's largest automaker.

Chrysler Group CEO Tom LaSorda presented the broad outlines of a turnaround plan to the board of parent DaimlerChrysler (Charts) on Wednesday, according to a report from the Detroit News, and will reveal the details publicly in mid-February.

Toyota passed DaimlerChrysler as the No. 3 in the U.S. market during 2006, as Chrysler went from profitability to losses.

Former Pfizer (Charts) CEO, Hank McKinnell, who was forced out of the drugmaker's top spot in February, will receive $198 million in total compensation, the company said in a filing Thursday. Shares of the Dow component still gained 0.5 percent in after-hours trading.

Oil prices rebounded early trading after Thursday's sell-off. U.S. crude gained 26 cents to $62.92 a barrel in electronic trading. Brent crude futures rose 36 cents to $62.82 in London.

Treasury prices were lower but pared losses after the inflation report, taking the yield on the 10-year note to 4.56 percent from 4.54 percent late Thursday. The dollar was lower against the euro and little changed against the yen.

Stocks in Asia closed Friday mostly higher, while major indexes in Europe were lower in early trading.

More market news and futures ahead of the open