Stocks look to open higher after bank bailout plan

Published 12:00 am Wednesday, December 2, 2009

NEW YORK (AP) – U.S. stocks headed
for a slightly higher open while the Treasury market calmed only
slightly Monday as investors cautiously awaited further news about the
government’s plan to buy $700 billion in banks’ mortgage debt.

Dow
Jones industrial average futures edged higher and the yield on the
3-month Treasury bill remained below 1 percent, indicating that
investors were still willing to take low returns on a safe asset.

Futures
had been lower but a stock buyback announcement and dividend increase
from Microsoft Corp. helped lift the technology-heavy Nasdaq 100
futures.

Investors are relieved that federal authorities are
taking action to relieve the nation’s banks of their toxic assets. But
it is not sure yet how successful the plan will be in loosening up the
credit markets and propping up the sinking housing market.

Bush
administration officials and congressional leaders met over the weekend
on the rescue plan, the main thrust of which congressional leaders have
endorsed.

The government continues to move on other fronts to
steady the nation’s financial system. Late Sunday, the Federal Reserve
granted Goldman Sachs and Morgan Stanley, the country’s last two major
investment banks, approval to change their status to bank holding
companies. That will allow the companies to set up commercial banks
that will be able to take deposits, significantly bolstering the
resources of both.

That change came a week after negotiations
failed to save Lehman Brothers Holdings Inc. That and the government’s
plan to bail out American International Group Inc. helped lead to a
seizing up of the credit markets that spurred the government to
formulate its plan to rescue companies from their crippling debt.

Wall
Street, meanwhile, suffered some of its worst turbulence in years, with
the Dow Jones industrials alternately falling and rising by hundreds of
points each day last week.

The market did get some good news from
Microsoft, which said it plans to repurchase as much as $40 billion of
its shares. The software maker said it completed a previous $40 billion
buyback plan. The company also raised its quarterly dividend to 13
cents from 11 cents.

Investors were still moving some money into
short-term Treasurys. The 3-month Treasury bill’s yield was at 0.93
percent, down slightly from 0.94 late Friday. The yield was a far cry
from yields around zero at the height of last week’s frenetic buying,
however; yields move in the opposite direction from price. Short-term
Treasurys are seen as the absolute safest place to place cash.

The
2-year note’s yield was at 2.20 percent, up from 2.14 percent Friday,
as investors sold those maturities. The yield on the 10-year benchmark
Treasury was higher, at 3.86 percent compared with 3.82 percent Friday.

Dow
futures rose 15, or 0.13 percent, to 11,374. Standard & Poor’s 500
index futures rose 2.60, or 0.21 percent, to 1,248.60. Nasdaq 100
futures rose 10.50, or 0.60 percent, to 1,750.00.

The dollar fell against most other major currencies, while gold prices rose.

Investors
were also watching rebounding oil prices. Light, sweet crude for
October delivery rose $1.75 to $106.30 a barrel in premarket electronic
trading on the New York Mercantile Exchange. On Friday, crude oil
jumped by more than $6 a barrel to break back above the $100-a-barrel
mark, and was up in premarket trading Monday.

Overseas markets
were mixed. In Asia, Japan’s Nikkei 225 index climbed 1.4 percent to
12,090.59 points, and Hong Kong’s Hang Seng Index rose 1.6 percent to
19,632.20.

In European trading, London’s FTSE fell 0.28 percent, Germany’s DAX fell 0.23 percent and France’s CAC 40 fell 0.12 percent.