U.S. Stock Futures Indicate Big Surge At The Bell
NEW YORK (MarketWatch) -- U.S. stocks were positioned to open sharply higher Friday as investors cheered The Federal Reserve's move to ease the market's liquidity worries by cutting one of its main interest rates by half a point.
"The Fed cutting the discount rate is probably what the markets need to get normality back in place and reverse this crisis of confidence we're having in the marketplace," said Peter Cardillo, chief market economist at Avalon Partners.
S&P 500 futures gained 25 points at 1,449 and Nasdaq 100 futures climbed 28.8 points to 1,885.3. Dow futures shot 156 points higher to 13,100.
Ahead of the opening, the Federal Reserve said it had cut the discount rate to 5.75%, while acknowledging the precarious state of credit markets in making the move.
Ahead of the Fed announcement, stock futures were trading broadly lower after the worst session in seven years from Japan's Nikkei 225.
U.S. stocks experienced a dramatic reversal in the final hour of trade Thursday, helping the Dow industrials recoup much of a 340-point deficit to finish only slightly lower.
St. Louis Fed President William Poole is due on Friday to speak about U.S. export opportunities.
Also on Friday's calendar will be the release of the preliminary University of Michigan consumer sentiment survey for August.
Traders will eye developments in Japan, which has suffered not just because the worldwide credit turmoil but also because its currency, the yen, has surged against rivals including the U.S. dollar as hedge funds and other investors unwind the so-called carry trade. Carry trades are when investors borrow against low-yielding currencies, such as the yen, to reinvest elsewhere.
The Nikkei 225 closed 5.4% lower in Tokyo, though not all international markets were as affected. Britain's FTSE 100 rose 0.5% after suffering its worst drop in four years.
Gold futures rose sharply, recovering from steep losses Thursday, after the Fed's announcement. Gold for December delivery rallied $11.60, or 1.8%, at $669.60 an ounce on the New York Mercantile Exchange.
Treasury prices lightened their gains, as stock futures contracts suddenly shot higher in response to the Fed.
The dollar lost some of its standing against the euro and pound, although it maintained its advantage over the yen, after the Fed action. The euro was up 0.4% at $1.3488 and the pound up 0.2% at $1.9877. The dollar rose 0.4% to 114.34 yen.
By Kate Gibson