Stock futures pare gains following GDP data
NEW YORK — Investors appeared ready to send Wall Street higher on Wednesday following two days of losses, even after a worse-than-expected reading on the economy.
Stock futures pared some of their early gains following the disappointing report of a contraction in the first-quarter gross domestic product, but still pointed to a higher open. The Commerce Department said GDP shrank at an annual rate of 6.1 percent at the start of this year as sharp cutbacks by businesses and a huge drop in U.S. exports eclipsed a rebound in consumer spending. Economists polled by Thomson Reuters had been expecting a 5 percent slide.
Though the report from the Commerce Department showed that the recession has yet to loosen its grip on the country, investors didn’t lose hope.
The market is eager for the Federal Reserve’s assessment of the economy, expected later Wednesday at the conclusion of its interest rate meeting. Investors also are curious if the central bank will accelerate its buying of Treasurys. After lowering its target rate to a range of zero to 0.25 percent, the Fed started buying government debt in March to try to lower rates in the market even further.
Ahead of the market’s open, Dow Jones industrial average futures rose 66, or 0.8 percent, to 8,033, after rising as much as 99 points prior to the report. Standard & Poor’s 500 index futures rose 9.50, or 1.1 percent, to 861.30. Nasdaq 100 index futures gained 12.25, or 0.9 percent, to 1,372.75.
The Dow remains 22 percent above its early March lows, but stocks have been vacillating over the past several days.
Swine flu worries triggered a selloff in the stock market Monday. Then on Tuesday, news that Citigroup Inc. and Bank of America Corp. might need more capital left the major indexes with losses. Tuesday’s pullback was modest, though, thanks to data showing a sharp jump in consumer confidence.
Furthermore, anxiety about swine flu is abating in the global markets. Countries around the world are testing potential cases and girding for a widespread outbreak. But so far, it seems the disease might be becoming less virulent the further away it is from Mexico, its apparent source.
Investors are still keenly focused on the financial sector, however.
Bank of America is preparing for what is expected to be a contentious annual meeting on Wednesday. The Charlotte, N.C.-based bank — one of the biggest recipients of government support — is facing pressure from shareholders for its acquisition of Merrill Lynch, with some investor groups calling for the ouster of Chairman and CEO Ken Lewis.
Meanwhile, Citigroup, which has also received massive amounts of federal aid, is said to be seeking permission from the Treasury Department to pay special bonuses to employees. According to a report in The Wall Street Journal late Tuesday, some key employees are threatening to leave the company because of pay restrictions placed on the bank by the government.
In earnings news, Time Warner Cable Inc. said sales rose in the first quarter, but its earnings fell 32 percent on restructuring and other costs related to its spin-off from former parent Time Warner.
In overseas trading, Japan’s Nikkei stock average fell 2.7 percent. In afternoon trading, Britain’s FTSE 100 rose 1.5 percent, Germany’s DAX index rose 1.0 percent and France’s CAC-40 rose 1.2 percent.
U.S. government bond prices were mixed.
The dollar was lower against other major currencies. Gold prices rose.
Light, sweet crude rose 53 cents to $50.45 a barrel in electronic trading on the New York Mercantile Exchange.
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