Stocks head for higher open on upbeat earnigns results

July 20, 2008 7:25:13 PM PDT
U.S. stocks headed for a sharply higher open Thursday after stronger-than-expected quarterly results from names like Coca-Cola, JPMorgan Chase and United Technologies offered investors some reassurance about the health of the economy. The rise in stock futures comes a day after falling oil prices and surprising bank results swept Wall Street to a huge rally. Oil continued its decline Thursday, likely helping to boost investor sentiment.

A flurry of quarterly results are offering investors some welcome insights into the well-being of the economy. Three components of the Dow Jones industrial average - Coca-Cola Co., JPMorgan Chase & Co. and United Technologies Corp. - issued comments that generally indicated that their businesses are holding up despite sometimes difficult economic conditions.

Dow futures, which had been flat and at times down ahead of the reports, jumped 110, or 0.98 percent, to 11,316. The Dow on Wednesday surged 276 points, or 2.5 percent, logging its best daily gain in three months.

Standard & Poor's 500 index futures rose 10.40, or 0.84 percent, to 1,251.50. Nasdaq 100 index futures rose 19.75, or 1.07 percent, to 1,864.50.

Stocks soared Wednesday after better-than-expected quarterly results from Wells Fargo & Co. helped ease some of investors' worries about the health of the banking sector. Wall Street has grown concerned that souring mortgage debt would force some banks to go under.

The results arriving early Thursday appeared to bolster a notion that perhaps investors had at times been overly dour in their assessment of the economy. To be sure, many companies have yet to report quarterly results and there are still trouble spots in the economy, such as the housing sector.

Bond prices declined Thursday as investors turned away from the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.96 percent from 3.94 percent late Wednesday.

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

Oil prices fell again Thursday. Light, sweet crude declined $1.24 to $133.36 in premarket electronic trading on the New York Mercantile Exchange. Oil fell more than $4 Wednesday and more than $6 Tuesday, offering investors some hope that perhaps commodity prices will begin to decline.

That would be welcome news for nearly all parts of the economy. Consumers, in particular, have been hard-pressed by higher fuel and food costs. Wall Street is worried they will pare their spending on discretionary items to make room in their budgets for the higher-priced necessities. A pullback could be troublesome as consumer spending accounts for more than two-thirds of U.S. economic activity.

Beyond quarterly results from big-name companies, investors are awaiting a government report on home construction and building permit applications for June. The Commerce Department report, due an hour before the 9:30 a.m. EDT opening bell, is expected to show construction of homes and apartments declined in June. A report is also due on weekly unemployment claims as is a Philadelphia Federal Reserve report on regional manufacturing.

Overseas, Japan's Nikkei stock average rose 1.00 percent. In afternoon trading, Britain's FTSE 100 rose 1.62 percent, Germany's DAX index rose 2.26 percent, and France's CAC-40 advanced 2.57 percent.