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U.S. stock futures are sharply higher Tuesday as attention turned to the U.S. government's comprehensive rescue plan to inject capital into several top financial institutions.
The government plans to inject $250 billion into a string of the country's largest banks, including Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC). President George W. Bush, in confirming the government's purchase of equity in financial institutions, said the plan will guarantee new bank debt and expand insurance for noninterest-bearing accounts. The rise in stock futures comes following the biggest one-day point gain ever for the Dow Jones Industrial Average.
"This is just the part of our rescue plan they have stop the bleeding and they have stop the fear in the market," said Futurepath Trading Futures Analyst and Broker Frank Lesh, adding that the government has stabilized the market and financials should trade higher on the expected news.
S&P 500 futures climbed 33 points to 1050, Nasdaq 100 futures jumped 20.5 points to 1479, and Dow industrial futures rose 297 points to 9805.After a three-day break, the Nikkei 225 surged 14% in Tokyo, while in London, the FTSE 100 recently traded higher.
Yields on the 10-year Treasury bond hit 4% for the first time since August, and crude-oil futures rose another $1.10 to $82.29 a barrel.
Meanwhile, Johnson & Johnson (JNJ) posted a 30% rise in third-quarter net income, as strong consumer-products and medical-devices sales offset the impact of stepped-up competition from generic-drug makers. The maker of Tylenol pain reliever, Band-Aid bandages and anemia drug Procrit also raised its 2008 earnings forecast. Shares rose 5.8% to $66.30 in premarket trading.
PepsiCo Inc. (PEP) posted a 9.6% decrease in third-quarter net income amid weak U.S. beverage sales as the company cut its full-year revenue view because of the rebounding dollar and said it will cut costs by $1.2 billion the next three years. Shares fell 4.3% to $59.10 premarket.
U.S. stocks spiked Monday for the first time in nine days after international government actions revived confidence in the banking sector and credit markets. The Dow industrials surged 936 points, the S&P 500 climbed 104 points, and the Nasdaq Composite jumped 194 points. Financial stocks were sharply higher premarket, with Morgan Stanley (MS) climbing 18% and Citigroup up 17%.
Other stocks set to be active Tuesday include:
-Wynn Resorts Ltd. (WYNN) declined 2.2% to $62 in premarket trading as the casino operator late Monday said that third-quarter earnings should fall significantly due to higher bad-debt reserves. The company also said it saw lower revenue from its table games.
-Rackable Systems Inc. (RACK) dropped 11% to $7.80 as the provider of servers and data-storage products slashed its fiscal-year outlook, saying it no longer expects to be profitable. Demand has dropped from corporate customers.
-By Aja Carmichael, Dow Jones Newswires; 201-938-5218; aja.carmichael@dowjones.com;
(Steve Goldstein contributed to this report.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=vHOHzZ4IRBsDQ6D7tv3Z%2BQ%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
10-14-08 0926ET
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