The Wall St. street sign is photographed in front of the American flag hanging on the New York Stock Exchange prior to a NYC Central Labor Council rally for worker protections, Thursday, Sept. 25, 2008 in New York. (AP Photo/Mary Altaffer)
NEW YORK – Wall Street was feeling more upbeat Thursday about the Federal Reserve's latest interest rate cut as investors awaited a preliminary reading on the economy in the third quarter that could offer further insights into the likelihood of a recession.
Stock index futures pointed sharply higher a day after Wall Street ended with a mixed finish that upended a late-day rally on the Fed's decision to lower its fed funds rate by a half-point to 1 percent. Many investors had hoped the market would build on an 889-point surge in the Dow Jones industrial average on Tuesday.
But the buying momentum seems to have picked up early Thursday from where it left off from Wednesday. Still, with volatility playing a central role on Wall Street and trading volume thin, stock futures are an imprecise indicator of how the market will fare. Even during trading hours, the back-and-forth moves on Wall Street have been enormous for more than a month as hedge funds and mutual funds and other professional traders shore up their positions or respond to sell orders.
A reading on the nation's gross domestic product and a weekly report on unemployment claims are likely to shape investor sentiment Thursday before the opening bell sounds at 9:30 a.m. EDT.
Wall Street expects GDP to contract for the first time since the fourth quarter of last year as consumers nervous about the economy and a sagging stock market pare spending. Analysts, on average, expect GDP — the measure of all goods and services produced within the U.S. — to decline at a 0.5 percent annualized rate for the third quarter, according to Thomson Reuters. GDP rose 2.8 percent in the second quarter.
Beyond the broadest economic report, investors also will be awaiting the Labor Department's data on the number of people who sought unemployment benefits last week. Wall Street expects the figure to drop by 3,000 to a seasonally adjusted level of 475,000, according to a survey of economists by Thomson Reuters.
Both the GDP and employment reports are due at 8:30 a.m. EDT.
Ahead of the numbers, Dow futures rose 251, or 2.8 percent, to 9,105. Standard & Poor's 500 index futures rose 22.70, or 2.5 percent, to 949.70, while Nasdaq 100 index futures rose 34.50, or 2.7 percent, to 1,328.50.
The climb in futures follows a disappointing end to trading Wednesday. The Dow rose as much as 298 points in the final minutes of trading before ending down 74.16 points, or 0.82 percent. Analysts variously blamed reports — later disputed — about a profit forecast at General Electric Co. and investors' profit-taking. The S&P 500 index fell 1.11 percent, while the Nasdaq composite index rose 0.47 percent.
But investors appear more hopeful Thursday that the Fed's rate cut will help stimulate a weak economy and add to other government measures to shore up the banking sector and restore confidence among lenders and investors.
Early Thursday, demand for government debt was mixed. The yield on the three-month Treasury bill, regarded as the safest investment around and an indicator of investor sentiment, fell to 0.53 percent from 0.55 percent Wednesday. A drop in yield indicates an increase in demand. Meanwhile, the yield on the benchmark 10-year Treasury note rose to 3.91 percent from 3.86 percent late Wednesday.
The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose 70 cents to $68.20 in premarket electronic trading on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average jumped 9.96 percent. In morning trading, Britain's FTSE 100 rose 0.69 percent, Germany's DAX index rose 2.99 percent, and France's CAC-40 advanced 0.68 percent.