RTRS: Wall St to open up on hopes of moves on banks, economy
Wall Street was set for a higher open on Wednesday on optimism the new administration was moving quickly to stabilize the ailing banking sector and as lawmakers get ready to vote on a stimulus package to boost the ailing economy.
Focus was also on the Federal Reserve's monetary policy-setting Federal Open Market Committee that began a two-day policy meeting on Tuesday. A statement will be released in the afternoon and investors will be watching for signals of any nonconventional methods of fighting the credit crisis.
Financial shares rose on hopes of help for the battered sector after a Bloomberg report that the Federal Deposit Insurance Corp is aiming to take control of a "bad bank", to be set up by the government to mop up banks' toxic assets.
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The Financial Select Sector SPDR XLF.P jumped 10 percent, while Citigroup (C.N) was up more than 22 percent to $4.35 and Bank of America (BAC.N) gained 20.2 percent to $7.81. Since hitting a 14-year low last week, financials have staged a rally outperforming the broad S&P 500.
The House of Representatives plans to vote later in the day on President Barack Obama's $825 billion package to stem the deterioration in the U.S. economy. Most House Republicans were expected to oppose the proposal but Democrats were confident they had the votes to push it through. [ID:nN27484090].
"The market is heading higher today on hopes that a 'bad bank/good bank' plan will help resolve the banking crisis," said Peter Cardillo, chief market economist at Avalon Partners in New York, adding:
"We're moving higher on the hopes the problems of the industry might find a solution, and, of course, the quick passage of the Obama stimulus package."
S&P 500 futures SPc1 rose 22.30 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures DJc1 climbed 154 points, and Nasdaq 100 NDc1 futures added 28.00 points.
Shares of Wells Fargo & Co (WFC.N) jumped 20.1 percent to $19.44 after it reported a quarterly loss but maintained its dividend and said it has no plans to request new capital from the government's financial aid program. [ID:nN28506494].
