US stocks set to begin quarter higher

NEW YORK, Oct 2 (Reuters) US stocks are likely to kick off the fourth quarter on a positive note on Monday, with a possible casino deal in the works and companies poised to release preliminary earnings updates.

Private equity suitors are close to arranging a deal to buy casino company Harrah's Entertainment Inc., The Wall Street Journal reported. For details, see ID:nN02297786.

Such a transaction would be an aggressive move by buyout firms into the tightly knit world of the gambling industry, the paper said, citing people familiar with the matter.

On Friday, the Dow Jones industrial average briefly rose to 11,741.99, just shy of the all-time high of 11,750.28 set on Jan. 14, 2000, but then retreated. The blue-chip index also capped off its best third quarter in 12 years.

''We're in the height of pre-earnings season, and the bulls will probably stay in charge,'' said Peter Cardillo, chief market analyst and chief strategist at SW Bach and Co. in New York. ''I see no imminent threat of this market reversing to the downside simply because we had a strong third quarter. What we could see is probably a less vivacious move to the upside.'' S&P 500 futures were up 1.2 points, above fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures rose 4 points, and Nasdaq 100 futures were up 1.25 points.

The Institute for Supply Management manufacturing index for September and August construction spending will give investors some clues about the health of the economy. Both indicators are set for release at 10 a.m. (1400 GMT).

Shares of LCA-Vision Inc. lost 21 percent after the closing bell on Friday after the company cut its 2006 earnings outlook.

ID:nWNAS7871 In extended-hours electronic trading, shares of the company slid to .58, down from a close of .31 on the Nasdaq.

Citigroup lowered its rating on Apple Computer Inc. to ''hold'' from ''buy,'' theflyonthewall.com reported on Monday.

Reuters could not immediately verify the report.

Shares of the company closed at .98 on Friday on the Nasdaq. ID:nWNA9858 The Dow Jones industrial average fell 39.38 points, or 0.34 percent, to end at 11,679.07 on Friday. The Standard&Poor's 500 Index .SPX> slipped 3.30 points, or 0.25 percent, to finish at 1,335.85. The Nasdaq Composite Index .IXIC> declined 11.59 points, or 0.51 percent, to close at 2,258.43.

REUTERS CS HS1658