Stocks head mostly higher after sell-off but credit concerns remain
NEW YORK -- U.S. stocks appeared poised to open mostly higher Thursday, a day after tumbling amid concerns about continuing credit woes, a weakening dollar and rising oil prices.
Stock futures, which had been flat, rose after Ford Motor Co. said it had a narrower-than-expected third-quarter loss. At the same time, some investors appeared poised to set aside some of their unease and hunt for bargains amid the wreckage of Wednesday's sell-off.
However, fresh reason for concern about toxicity within the credit markets -- the cause of much of Wall Street's recent angst -- could keep some investors on the sidelines. Morgan Stanley warned late Wednesday its fourth-quarter profit would be reduced by $2.5 billion in write-downs related to troubles in the credit market.
In announcing it could lose up to up to $6 billion if all debt related to subprime mortgages were to go bad, the nation's No. 2 investment bank confirmed investors' fears not only about the company itself but about the likelihood that Wall Street will be forced to digest more bad news about souring debt. The debt is tied to mortgages of borrowers with poor, or subprime, credit.
The Dow Jones industrial average, for the third time in a month, dropped more than 350 points Wednesday, offering the latest sign of how jittery many investors remain. On Wednesday, the Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped nearly 24 percent.
Dow futures on Thursday rose 41, or 0.31 percent, to 13,396. Standard & Poor's 500 index futures rose 5.70, or 0.38 percent, to 1,488.50, and the Nasdaq composite index fell 2.00, or 0.09 percent, to 2,179.00.
Government bonds fell after spiking Wednesday. The yield on the 10-year Treasury note, which moves opposite its price, rose to 4.33 percent from 4.30 percent in after-hours trading Wednesday.
The dollar was lower against other major currencies, while gold prices rose.
Light, sweet crude rose 51 cents to $96.88 in premarket electronic trading on the New York Mercantile Exchange.
Investors trying to ferret out when a greater calm might return to the markets will likely follow testimony from Federal Reserve Chairman Ben Bernanke, who is scheduled to appear before Congress' Joint Economic Committee to weigh in on the economic forecast.
Wall Street will be looking for hints as to whether the central bank is likely to cut interest rates again when it meets next month. The Fed lowered rates in September and again last week but issued comments with the latter cut that many investors saw as aimed at tempering expectations for further reductions. The losses of recent sessions put the major indexes below where they stood when the Fed cut rates by a larger-than-expected amount in September and triggered a broad market rally.
As expected, the European Central Bank and, separately, the Bank of England, left interest rates unchanged on Thursday.
In corporate news, Ford posted a narrower third-quarter loss than Wall Street expected. Stripping out items that analysts typically exclude, the loss came to a penny a share. This was far less than the 46 cent-a-share loss analysts had been expecting on average, according to a Thomson Financial poll.
News of possible dealmaking also appeared to help boost investor sentiment. Mining company BHP Billiton PLC confirmed speculation that it would go after rival Rio Tinto PLC. Rio Tinto's rejection of the offer didn't appear to dissuade BHP Billiton, according to Dow Jones Newswires.
Cisco Systems Inc. reported first-quarter sales and earnings Wednesday that topped Wall Street's expectations. However, investors were displeased that the company didn't boost its long-term growth targets, sending the stock lower in after-hours electronic trading. Early Thursday, the stock was off about 6 percent.
And some well-known soft spots in the economy continued to show signs of distress. Luxury homebuilder Toll Brothers Inc. reported Thursday that its revenue and backlog in the fourth quarter fell sharply amid a supply glut.
Overseas, Japan's Nikkei stock average closed down 2.02 percent and Hong Kong's Hang Seng index fell 3.19 percent. Britain's FTSE 100 rose 0.26 percent, Germany's DAX index rose 0.32 percent, and France's CAC-40 fell 0.63 percent.