Wall Street to open higher on latest auto bailout
By Leah Schnurr Leah Schnurr – 6 mins ago Reuters
NEW YORK (Reuters) – Stocks were poised to rise at the open on Tuesday after Washington expanded its bailout of the auto industry, while volume was expected to be light in the holiday-shortened week.
Investors were also awaiting economic data later in the day, including consumer confidence, a reading on business activity in the U.S. Midwest, and data on home prices.
Late on Monday, the Bush administration said it was increasing a loan to General Motors (GM.N) by $1 billion and buying $5 billion in equity in GMAC, GM's finance arm.
It was the latest in a string of government moves in an effort to ease tight credit markets and cushion the impact of the year-long recession.
GM's shares were up 11.1 percent at $4.00 in premarket trading, while rival Ford (F.N) rose 7.2 percent to $2.38.
Peter Cardillo, chief market economist at Avalon Partners in New York, said that while there could be negative consequences of the series of bailouts in the long term, it limited the fallout from the recession in the near term.
"The alternative obviously could be worse, so I think that maybe the market has finally got it -- we have a short-term fix and a long-term problem that we can deal with later," said Cardillo.
S&P 500 futures rose 5.40 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 climbed 37 points, and Nasdaq 100 futures added 9.00 points.
The day after Dow Chemical (DOW.N) shares fell sharply on concerns over its ability to fund the takeover of Rohm & Haas (ROH.N), the Financial Times reported Dow could tap a $13 billion bridge loan or renegotiate the price to salvage its $15 billion takeover.
Kuwait decided to scrap a joint venture with Dow Chemical over the weekend, depriving the company of financing it planned to use for the acquisition. Dow was up 3.3 percent at $15.83 before the opening bell.
Earlier in the month, the U.S. government agreed to throw a lifeline to GM and Chrysler LLC with up to $17.4 billion in emergency loans to head off a potential collapse that would have cost hundreds of thousands of jobs and further hit the already beleaguered economy.
Shares of retailers could fall as data showed that the recession, deep discounting by retailers and bad winter weather combined to produce the worst holiday season since at least 1970.
Oil prices fell below $40 a barrel as concerns over the outlook for global growth overshadowed continuing tensions in the Middle East.
A jump in oil prices on Monday had boosted energy shares, limiting declines in U.S. markets that ended lower on concerns about Dow Chemical's planned takeover of Rohm & Haas. But higher oil also raised worries of more pressure on already cash-strapped consumers.
Volume was expected to be light throughout the week shortened by the New Year's holiday. The broad S&P 500 is down about 40 percent for the year, making it one of the worst ever.
(Editing by Tom Hals)
