US STOCKS-Futures point to gains on hope for 'cliff' flexibility
* Media report lifts futures, could indicate cliff progress
* S&P 500 heading for second straight week of steep losses
* Dell shares fall before open as profit slides 47 percent
* Futures up: Dow 8 pts, S&P 4.4 pts, Nasdaq 9.5 pts
By Ryan Vlastelica
NEW YORK, Nov 16 (Reuters) - U.S. stock index futures pointed to a higher open on Friday, reversing earlier weakness, after the Wall Street Journal reported White House officials were in discussions that could indicate increased flexibility to negotiate on the "fiscal cliff."
Citing sources familiar with the matter, the Journal said officials were in advanced, internal talks to replace spending cuts set to begin in January with a separate package of spending cuts and tax increases. The White House had no comment on the report.
Investors have been concerned that if no deal was reached on the large, automatic budget cuts and tax hikes set to begin next year, the economy could slip into recession. The S&P is down 4.3 percent over the past two weeks.
"I have to believe the government will come to some kind of resolution, but every day that passes without any progress is another day where the path of least resistance will be down," said Robert Pavlik, chief market strategist at Banyan Partners LLC in New York.
Democrats and Republicans appeared to dig in their heels into opposing positions, echoing last year's political impasse over raising the U.S. debt ceiling.
President Barack Obama spokesman Jay Carney told reporters the president wouldn't sign, "under any circumstances, an extension of tax cuts for the top 2 percent of American earners," while Senate Republican leader Mitch McConnell said Republicans won't raise tax rates, echoing
Obama and congressional leaders are meeting for budget and tax talks on Friday, a meeting scheduled to begin at 10:15 a.m (15:15 GMT) at the White House.
Concerns over the cliff have pressured stocks ever since the Nov. 6 presidential election. Even with the rise in futures the S&P is on track to notch a second straight week of losses of more than 1 percent.
S&P 500 futures rose 4.4 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 8 points and Nasdaq 100 futures added 9.5 points.
The S&P is currently down 1.9 percent for the week, while the Dow is off 2.1 percent and the Nasdaq is down 2.3 percent. The S&P 500 sunk to a 3 1/2-month closing low on Thursday and remained well below its 200-day moving average, which it pierced last week.
While the S&P remains up 7.6 percent for the year, what had looked like a stellar 2012 for stocks has turned into merely an average year. Though some investors have become more inclined to protect their gains as 2012 draws to a close, others view the decline as a buying opportunity.
"I think we're closer to the end of this decline than to the beginning, and valuations are becoming extremely attractive," Pavlik said. "If you're not putting a buying list together, you're doing yourself a disservice."
Dell Inc will be in focus a day after reporting a steep drop in its quarterly profit. Shares fell 2.2 percent to $9.35 in premarket trading.
Sears Holdings Corp late Thursday reported a quarterly loss that was narrower than expected, but same-store sales fell on weak demand for electronics, sending shares down 5.8 percent to $55.11 before the bell. Gap Inc raised its full-year profit view, quelling concerns of a slowdown going into the holiday season. Gap shares rose 4 percent to $34.60.
J.M. Smucker Co reported a rise in second-quarter earnings, helped by a drop in commodity costs.
A flare-up in violence in the Middle East added to market unease as Israeli warplanes bombed targets in and around Gaza city for a second day, while two rockets fired from the Gaza Strip targeted Tel Aviv.
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