Investors appeared ready to move back into the stock market Wednesday, pushing index futures higher after five straight days of heavy selling. A rebound would be likely be based more on bargain hunting than conviction as very few, if any, analysts and investors expect the day’s economic news to show significant improvement.
The Institute for Supply Management’s services sector index will be released at 10 a.m. Eastern time. Earlier this week, the organization of corporate purchasing executives said its index tracking the manufacturing sector shrank for the 13th straight month in February.
Later Wednesday, the Federal Reserve will release its “beige book,” an assessment of the economy by region. Meanwhile, Treasury Secretary Timothy Geithner will testify on Capitol Hill for a second day on the president’s budget proposal.
Investors got a bit of good news from the housing industry Wednesday, as homebuilder Toll Brothers Inc. said its loss in the fiscal first quarter narrowed as it slashed expenses. Still, revenue plummeted 51 percent as the company sold fewer homes.
Retailer Costco Wholesale Corp. said its fiscal second-quarter profit fell 27 percent on weaker sales of non-food items and the heavy discounting needed to move out merchandise during a sluggish holiday season.
The earnings reports provided more signs of weakness in both housing and consumer spending, two of the most critical sectors of the economy. Many analysts believe that a turnaround in the housing market is necessary before the economy can heal, while consumer spending accounts for more than two-thirds of U.S. economic activity.
Investors are also mindful of Friday’s February jobs report. The monthly unemployment figures have become one of the most watched indicators of the economy’s health, as rising unemployment means consumers spend less. In a possible sign of what to expect, the ADP National Employment Report said Wednesday that its gauge of the labor market showed private sector employment fell by 697,000 in February, a bigger drop than expected.
Ahead of the market’s opening, Dow Jones industrial average futures rose 96, or 1.44 percent, to 6,765. Standard & Poor’s 500 index futures added 9.80, or 1.42 percent, to 699.30, while Nasdaq 100 index futures gained 15.25, or 1.42 percent, to 1,087.25.
The market has made attempts at a rally before, only to slump further amid ongoing pessimism about the economy. “The question is will the initial bounce hold?” asked Peter Cardillo, chief market economist at brokerage house Avalon
Wall Street is anxious for more details on the government’s bank rescue plan, which includes a proposal for a government-private partnership to buy up bad assets on banks’ books. The market is hoping Geithner soon will offer up more specifics.
Bond prices were mixed early Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.01 percent from 2.89 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, was unchanged from late Tuesday at 0.26 percent.
The dollar fell against other major currencies, while gold prices rose. Light, sweet crude rose $1.66 to $43.31 a barrel in electronic pre-market trading on the New York Mercantile Exchange.
Markets overseas advanced Wednesday on hopes for a big Chinese stimulus package that could help boost economies around the worldPartners. “We need to see clarity; we need to see confidence return to the marketplace.”
Copyright 2009 AP