Wall Street points higher as stocks rise overseas

February 26, 2009 5:21:48 AM PST
Wall Street headed toward a higher open Thursday as investors showed some relief over the prospects for banks and awaited economic readings on demand for big-ticket manufactured goods and home sales.

Stocks jumped in Europe ahead of the start of U.S. trading after the British government set up a program to allow banks to access government insurance against future losses on bad assets. Investors also cheered moves by Royal Bank of Scotland to sell off businesses and a decision by Swiss banking giant UBS AG to replace its chief executive.

In the U.S., investors tracked efforts by Citigroup Inc. to draw more government money while avoiding a takeover by the government.

The focus wasn't solely on the financial industry. General Motors Corp. reported a $9.6 billion loss for the fourth quarter and said it burned through $6.2 billion of cash in the last three months of 2008. Top GM executives were in Washington, D.C., Thursday to meet with the Obama administration's auto task force to talk about restructuring and additional loans.

Dow Jones industrial average futures rose 111, or 1.5 percent, to 7,339. Standard & Poor's 500 index futures rose 13.60, or 1.8 percent, to 775.30, while Nasdaq 100 index futures rose 17.00, or 1.5 percent, to 1,171.25.

Stocks ended a bumpy session down 1 percent Wednesday, continuing a back-and-forth week for the stock market. The government on Wednesday addressed some questions about banks by confirming it will buy preferred shares from banks that can be converted into common shares. It reiterated that it does not plan to nationalize banks.

Beyond the developments at banks and among automakers, Wall Street is looking for any signs that the economy is slowing its descent. That could signal demand from consumers and businesses is set to rebound. But few economists expect the numbers will soon show a recovery.

Wall Street predicts manufacturers saw demand for goods like cars, airplanes, household appliances and furniture fell in January for the sixth straight month. Government figures are expected to show that orders for durable goods - manufactured products expected to last at least three years - fell 2.5 percent in January, according to economists surveyed by Thomson Reuters.

The Commerce Department report is due at 8:30 a.m. EST.

Investors also expect the government will show that new home sales fell slightly in January to a record low for the second straight month. Wall Street economists expect the Commerce Department to report that new home sales fell in January to a seasonally adjusted annual rate of 330,000 units from 331,000 units a month earlier.

The report is expected at 10 a.m.

Wall Street also will be examining President Barack Obama's budget proposal. The White House is sending Congress a budget Thursday that projects the government's deficit for this year will jump to $1.75 trillion.

Overseas, the British government is hoping its Asset Protection Scheme will increase lending by reducing banks' uncertainty about the value of past investments.

Royal Bank of Scotland posted an annual loss of $34.4 billion, the biggest in British corporate history, and announced a massive restructuring in which the company will jettison many of its international businesses. The company said it will put toxic assets into the UK government insurance program. That could result in the state boosting its stake in the company to as high as 95 percent.

Also in Europe, UBS replaced its CEO on Thursday, naming Oswald J. Gruebel to take over immediately. He is the former head of crosstown rival Credit Suisse Group and led a turnaround of that company before he left two years ago. Gruebel replaces Marcel Rohner, who has resigned.

In afternoon trading, Britain's FTSE 100 rose 1.19 percent, Germany's DAX index rose 1.87 percent, and France's CAC-40 rose 2.09 percent. Earlier, Japan's Nikkei stock average slipped 0.04 percent.

In the U.S., investors are watching for news from Citigroup Inc. The company's effort to boost its equity capital could result in the federal government raising its stake in the bank this week to as much as 40 percent, a person familiar with the talks said.

The company received $45 billion in U.S. bailout money made up primarily of debt-like preferred shares, plus federal guarantees to cover losses on some $300 billion in risky investments. The bank has been in talks with regulators over ways the government could help strengthen the bank still further.

While a deal is unlikely to be announced early Thursday, it could be come within days, the person told The Associated Press late Wednesday, asking not to be named because the discussions are still continuing.

Bond prices were mixed early Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.01 percent from 2.93 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, was flat at 0.29 percent from Wednesday.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude rose 89 cents to $43.39 in premarket trading on the New York Mercantile Exchange.

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