Wall St set to bounce after Thursday selloff

MARKETS-USA-STOCKS:Wall St set to bounce after Thursday selloff

new York  June 22, 2012, 19:03 IST

new York  06 22, 2012, 19:10 IST

 

U.S. stock index futures pointed to modest gains on Friday, indicating the benchmark S&P 500 index may rebound from its second-worst decline of the year.

The index dropped 2.2 percent in the prior session, its biggest drop since a 2.5 percent fall on June 1, as evidence mounted of slowing manufacturing growth worldwide, a threat to corporate profits.

"Definitely a bounce here although it is simply a reaction to how sharp the selloff was yesterday," said Tim Ghriskey, Chief investment officer of Solaris Asset Management in Bedford Hills, New York.

Futures briefly pared gains on Friday after U.S. central bank official Jeffrey Lacker, an inflation hawk, said the latest monetary stimulus, an extension of its "Operation Twist," risks higher inflation and will not do much to boost a weakening U.S. economy.

"The market expected something out of the Fed and the Fed didn't want to totally disappoint - while Twist might not do a lot, it certainly does have an impact," said Ghriskey.

Markets are expected to see a volume spike at the close, just before Russell Investments sets the final rebalance of its indexes, in which $3.9 trillion in assets are benchmarked to globally.

After falling for two consecutive sessions, the S&P 500 index is down 1.3 percent for the week, but remains on track for its first monthly gain in three months.

Investors will eye banking shares after ratings agency Moody's downgraded 15 of the world's biggest banks on Thursday, lowering credit ratings by one to three notches to reflect their risk of losses from volatile capital market activities.

Morgan Stanley added 2.4 percent to $14.29 and Bank of America Corp rose 1.6 percent to $7.95 in premarket trade, as many of the ratings cuts weren't as deep as expected.

S&P 500 futures rose 6.7 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 added 38 points, and Nasdaq 100 futures gained 8.75 points.

European shares extended the previous session's losses triggered by poor macroeconomic data. The FTSEurofirst 300 index of top European shares fell 0.4 percent.

The leaders of Germany, France, Italy and Spain will try to find common ground in Rome to restore confidence in the euro zone ahead of a full EU summit next week, which Italy's prime minister called a defining moment.

Darden Restaurants Inc dipped 2.3 percent to $49.25 in premarket trade after the restaurant operator reported fourth-quarter earnings. The company expected its business environment in 2013 "to be similar to 2012, with slow and uneven recovery in economy and industry.

Ryder Systems Inc slumped 9.8 percent to $36.75 in premarket after the logistics company cut its quarterly earnings forecast, amid lower demand for its commercial rental services.

Monster Beverage Corp added 2.9 percent to $76.93 in light premarket trade after S&P said the company will replace Sara Lee Corp in the S&P 500 <.SPX> after the close of trading on June 28. Sara Lee is spinning off its international Coffee & Tea business.

(Editing by Bernadette Baum)