Stock futures rise following European gains

August 9, 2010 6:20:43 AM PDT
Stock futures rose modestly Monday following signs Europe's recovery is speeding up, though gains were kept in check as investors look to the Federal Reserve for direction about the domestic economy.

European markets climbed after German exports reached their highest levels since late 2008, indicating the country's economy is recovering much faster than previously thought. There were concerns this spring that mounting government debt in countries like Greece, Spain and Portugal would stagnate Europe's economy. The German exports report was the latest data from the continent that showed the pace of growth is speeding up rather than slowing down.

Futures were also getting a lift after investors rethought their initial disappointment to the resignation of Hewlett-Packard Co.'s CEO. And McDonald's Corp. said a key sales figure rose 7 percent last month.

Investors are still concerned though that domestic economic data continues to point toward a slowdown in growth. That has added to the importance of the Fed's meeting Tuesday. There are no economic reports due out Monday that could provide investors with clear signs about the recovery.

The Fed will likely leave interest rates at historic lows, but could signal plans to restart some stimulus programs.

The Fed let many programs expire this year, such as purchasing mortgage-backed securities, as it appeared the recovery was gaining steam. The Fed could hint Tuesday that it is ready to start new programs to encourage lending even if it doesn't implement them immediately.

In the statement that accompanies the interest-rate decision, the Fed is expected to provide its assessment of future growth. Chairman Ben Bernanke spooked markets just a few weeks ago when he said the forecast for recovery remains "unusually uncertain."

Momentum has slowed as companies remain skittish about hiring a significant amount of workers and people worried about their jobs cut back on spending. Analysts have said strong economic growth will not occur until there are consistent signs that private employers are ramping up hiring.

Ahead of the opening bell, Dow Jones industrial average futures rose 45, or 0.4 percent, to 10,658. Standard & Poor's 500 index futures rose 5.20, or 0.5 percent, to 1,124.70, while Nasdaq 100 index futures rose 7.50, or 0.4 percent, to 1,910.00.

Germany's DAX index gained 1.3 percent, Britain's FTSE 100 rose 1.4 percent, and France's CAC-40 rose 1.6 percent. Japan's Nikkei stock average fell 0.7 percent.

In corporate news, Hewlett-Packard CEO Mark Hurd was forced to resign on Friday after a sexual harassment claim led to the discovery he falsified expense reports. HP shares rose 95 cents, or 2.3 percent, to $42.80 in pre-opening trading. Shares dropped nearly 10 percent in after-hours trading Friday when his resignation was announced.

McDonald's rose 61 cents to $72.35 after saying sales at stores open at least 13 months jumped in July, including a 5.7 percent increase in the U.S.

Both HP and McDonald's are Dow components.

Stocks slid Friday, but closed the day well off their lows after the Labor Department said the unemployment rate remained at 9.5 percent in July and private employers hired fewer people than forecast last month.

The Dow closed down just 21 points Friday after being down as much as 160 points earlier in the day. Trading volume remained extremely light, which can exaggerate gains and losses.

Bond prices traded in a narrow range Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unchanged at 2.82 percent, compared with late Friday.


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