By Denise Duclaux
NEW YORK, Sept 27 (Reuters) - Stocks are set to sag at Friday's open after sour investment calls on conglomerate General Electric Co. and a dire outlook from cigarette leader Philip Morris Cos. Inc. aggravated deep-seated worries over corporate profit growth.
"We still have earnings problems, economic growth problems and international problems -- and until those get straightened out the market is not going to do anything," said James Volk, managing director of equity trading at D.A. Davidson and Co.
Lehman Brothers and Credit Suisse First Boston cut their investment ratings on GE a day after the conglomerate held a conference call with analysts. The two investment banks said a recovery in such "short-cycle" businesses as its plastics unit seems to have stalled and its finance unit is under pressure. GE, a Dow component, fell to $25 before the bell from a $26.38 close.
Philip Morris, the world's largest cigarette maker and another member of the Dow, slashed its full-year outlook, saying that despite heavy promotions of its premium-priced brands, consumers have turned to deep-discount rivals. Philip Morris slumped to $37.50 before the bell from its finish of $42.73.
Two pieces of economic data will offer more clues on the health of the economy. The government will release its final report on second-quarter gross domestic product at 8:30 a.m. (1230 GMT). Many investors, however, are already focused on how the fourth quarter will shape up. The University of Michigan's final report on consumer sentiment will hit the market after the open at 9:45 a.m. (1345 GMT).
Equity futures pointed to a drop at the open. December futures for the Standard & Poor's 500 fell 6.20 points to 848.30. Dow Jones Industrial futures lost 66 points to 7,886, while Nasdaq 100 futures dropped 8 points to 865.
European shares were mixed. The FTSE Eurotop 300 index was up 0.4 percent, while the narrower DJ Euro Stoxx 50 index shed 0.4 percent.
Stocks clawed back further ground in Asia after better-than-expected U.S. economic data on Thursday and hopes Japan will inject public funds into ailing banks. Tokyo's Nikkei stock average rose more than 2 percent, led by banks and brokers after a newspaper reported plans by the Financial Services Agency to step up the disposal of banks' bad loans.
Friday's final reading on U.S. economic growth as measured by gross domestic product is expected to show a rise of 1.2 percent vs. a previous reading of 1.1 percent. The consumer confidence index is expected to drop further to 85.9, according to economists in a recent Reuters survey.
In other corporate news, Citigroup Inc. , seeking to end probes into its stock-research practices, will meet with federal regulators Friday to propose a settlement that includes plans to sever ties between its research and investment-banking businesses, The Wall Street Journal reported.
Local telephone company SBC Communications Inc. said on Thursday after the close it will cut 11,000 jobs, or about 6 percent of its work force, and slash capital spending to offset pressures from the weak economy, competition and regulations.
Lehman Brothers said on Friday it lowered its 2003 earnings outlook for KLA-Tencor Corp. citing weak results in the chip equipment sector and cautious spending comments by leading chip makers.
The U.S. Navy turned up the pressure on two of its largest contractors -- Boeing Co. and General Dynamics Corp. -- to pay back $2.3 billion related to a canceled fighter-jet program or face having payments withheld for other work, The Wall Street Journal reported.
Wyeth , which has seen sales of its top-selling hormone replacement drugs plummet since July over safety concerns, said on Thursday after the close it will update its 2002 earnings forecast on Friday morning.
A slew of better-than-expected U.S. economic data boosted blue chips on Thursday as investors hoped a better outlook for corporate profits would follow, but technology stocks lagged after a dramatic snapback on Wednesday.
The data took the edge off fears over the pace of the economic recovery. Orders for durable goods dipped in August, but the drop was smaller than expected. New jobless claims fell for the second straight week, and sales of new U.S. homes rose to a record level in August.
The blue-chip Dow Jones industrial average was up 155.30 points, or 1.98 percent, at 7,997.12. The Dow rose for a second day after hitting a four-year low on Tuesday. The broad Standard & Poor's 500 Index climbed 15.29 points, or 1.82 percent, at 854.95.
The Nasdaq Composite Index eased 0.68 point, or 0.06 percent, at 1,221.61, after dropping to a six-year low earlier in the week. It surged 3.4 percent on Wednesday.
Support -- where buyers are expected to swoop in -- is at 1,205 for the Nasdaq, 7,700 for the Dow and 820 for the S&P 500, according to research firm Schaeffer's Investment Research. Resistance -- the point where sellers are likely to emerge -- is at 1,250 for the Nasdaq, 8,160 for the Dow and 870 for the S&P. The levels are key elements of technical analysis, which studies prices, volume and charts.