U.S. Stocks Poised To Open Up As Calm Returns
NEW YORK (MarketWatch) - U.S. stocks are positioned to open higher Thursday, with the market on firmer footing after Bank of America Corp.'s $2 billion vote of confidence in troubled Countrywide Financial Corp. offset worries about the survival of the country's biggest mortgage lender.
"There's a belief in the credit markets that things have eased a bit. At least in the near-term a relative state of tranquility has settled into the markets as we wait for the next shoe to drop," said Art Hogan, chief market strategist at Jefferies & Co.
Futures for the Dow Jones Industrial Average were up 45 points at 13,320, while those for the S&P 500 index gained 7.1 points to 1,475.
Nasdaq 100 futures gained 6.2 points to 1,951.
In announcing its investment late Wednesday, Bank of America called Countrywide undervalued due to the current market "turmoil." Hammered during the broadening crisis in the home loan business, Countrywide's stock jumped XX% ahead of the opening bell.
Bank of America's move is seen both as a means of helping Countrywide weather problems in the global credit markets, as well as preventing further losses at the mortgage lender from hurting the underlying economy.
Analysts at Bear Stearns didn't see the move leading to a full takeover.
"Bank of America executives have said repeatedly that they do not want to try to manage mortgage servicing rights assets exceeding $20 billion, as Countrywide must, given its business model," the broker said.
"We view this as an investment by Bank of America, on terms that could generate a significant profit for the bank, in a customer facing a liquidity squeeze which could have negative short-term implications for the U.S. financial system."
Deutsche Bank said the real estate finance sector would likely rally on the news, suggesting investors buy Redwood Trust .
More earnings came from the retail sector, with New York & Co. cutting its forecast, and Stein Mart reprting a 78% profit fall. After the close Gap reports quarterly results.
U.S. stocks climbed Wednesday, lifting the Dow 145 points after Bank of America, Citigroup Inc. , JPMorgan Chase & Co. , Deutsche Bank AG, and Wachovia borrowed money from the Federal Reserve. Tapping the central bank for funds from the Fed would usually be viewed in a negative light, but the move came as a way of bolstering the financial system after the Fed cut its discount rate last week.
Data
Ahead of Thursday's opening, the Labor Department's tally of jobless claims came in as expected, with the number of those filing for initial unemployment benefits for the week ending Aug. 18 falling by 2,000 to 322,000.
Other markets
Treasurys were broadly lower, with the benchmark 10-year note down 4/32 at 100 21/32, with a yield of 4.666%.
Gold futures advanced, boosted by gains on global equity markets, with the contract for December delivery up $4.30 at $673 an ounce on the New York Mercantile Exchange.
By Kate Gibson