Stock slide set to continue
Reports of new talks in Yahoo deal aren't enough to lift futures ahead of retail sales, which are expected to show further weakness.
NEW YORK (CNNMoney.com) -- Reports of new players entering into deal talks with Yahoo and raised earnings guidance from two Dow components were not enough to lift the outlook for U.S. stocks in the early going.
Just after 7 a.m. ET futures were down, pointing to another lower open for major indexes, although futures came off of earlier lows after Wal-Mart Stores and DuPont lifted their earnings targets.
Sources told Fortune and other news outlets Wednesday evening that Yahoo (YHOO, Fortune 500) and the AOL unit of Time Warner (TWX, Fortune 500) are in talks to combine the operations of the the two Internet giants. Yahoo also announced a deal to give advertising space to Google (GOOG, Fortune 500) as part of a short-term deal that could lead to a bigger partnership.
But there were reports that Yahoo bidder Microsoft (MSFT, Fortune 500) is now in talks with News Corp. (NWS, Fortune 500) for a joint bid for Yahoo, a move that could raise Microsoft's bid for Yahoo. Shares of Yahoo gained 2.2% in heavy early trading in Frankfurt on the reports.
Fortune and CNNMoney.com are both units of Time Warner.
Retailers in focus. Investors will also be waiting to see March sales reports from major retailers. Sales tracker Thomson First Call forecasts that sales at stores open at least a year, a closely watched measure known as same store sales, slipped 0.1% in the month at major store chains, a further sign of consumers pulling back and a weaker U.S. economy.
Wal-Mart Stores (WMT, Fortune 500), the world's largest retailer, posted a 1.1% gain in same store sales, but excluding gasoline sales the rise was only 0.7%, at the lower end of their guidance that those sales would be between flat to up 2%. The First Call forecast was for a 1% rise.
But Wal-Mart raised its first quarter earnings per share guidance to 74 to 76 cents, up from its previous range of 70 to 74 cents. First Call's EPS forecast is 72 cents. Shares of Wal-Mart gained only 0.3% in pre-market trading on the higher guidance, though.
The first major retailer to report Thursday, wholesale club Costco (COST, Fortune 500), reported a 7% company wide sales gain, topping the forecast of a 5.9% rise. But sales of gasoline and at international stores allowed it to post the stronger-than- expected sales. Excluding gas sales, U.S. stores saw only a 3% gain, the same gain it saw on that basis in February.
Dow component DuPont (DD, Fortune 500), the nation's No. 3 chemical company, raised its earnings forecast early Thursday, as strong growth in its agriculture businesses and emerging markets overcame weakness in U.S. construction and automotive markets.
Problems are likely to continue for American Airlines and its customers Thursday as the AMR Corp. (AMR, Fortune 500) unit canceled more than 900 flights Thursday to fix faulty wiring in hundreds of jets, the third straight day of mass groundings. AMR shares plunged 11% in trading Wednesday, and they were down 11% in early Frankfurt trading Thursday.
Oil prices were essentially unchanged from their record high close of $110.87 Wednesday, as they gave up early gains that had lifted prices as high as $112.20 in early electronic trading.
Economic reports showed a larger-than- expected U.S. trade gap for February but smaller-than-forecast weekly reading on initial jobless claims.
Initial jobless claims are forecast to fall to 357,000, down from the previous week's reading, which was revised slightly higher to 410,000, the first time they had spiked above the 400,000 mark since September 2005 in the wake of Hurricane Katrina. Economists surveyed by Briefing.com had forecast claims would only fall to 383,000, so the much lower reading was a rare piece of labor market strength following three consecutive declines in the monthly payroll figures that fed the growing belief the U.S. economy has fallen into a recession.
The trade gap grew to $62.3 billion from the $58.2 billion deficit in January. Exports again rose to a record level, but that was not enough to overcome surprisingly strong demand for imported goods, even though demand for oil imports slipped in the face of higher prices.
Dollar down again. The weakening in the dollar was further demonstrated Thursday when the Chinese central bank set the yuan at 6.992 against the dollar, the first time the currency has broken through the seven-to-a-dollar mark. The U.S. trade gap with China is the largest among all of its trading partners, and U.S. officials have been pressing China to allow its currency to appreciate versus the greenback.
The dollar also continued its slide against the yen and the euro in early trading.
In overseas trading major markets in Asia closed mixed, with Tokyo and Singapore losing ground while Hong Kong, Taiwan, Shanghai and Seoul posted solid gains. Major European markets were down in early trading. 
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