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Futures Jump After Durable-Goods Report

U.S. stock index futures bounced back after a better-than-expected report on durable-goods orders.

Earlier, futures had been indicating a lower open as worries about tropical storm Gustav continued to push up oil prices.

Durable-goods orders, which are items such as cars and appliances meant to last three years or more, rose a surprising 1.3 percentin July amid strong aircraft sales. However, when you strip out the volatile transportation category, orders rose 0.7 percent, when analysts had expected a drop of 0.5 percent. Nondefense capital goods orders excluding aircraft, seen as a barometer of business spending, jumped 2.6 percent, the sharpest gain since April. That category was expected to drop 0.1 precent.

Crude oil jumped more than $1, topping $118 a barrel, due to Gustav jitters, as well as dollar weakness and tension between Russia and the West after Russia recognized breakaway regions in Georgia also supported energyprices.

Fannie Mae and Freddie Mac remained in the spotlight. Merrill Lynch said it expects a Fannie loss of $7.37 a share and cut its price target on the stock to $5, and pegged Freddie's loss at $2.89 a share and slashed its price target to $3.

Morgan Stanley cut its profit forecast for Goldman Sachs nearly in half, saying it expects a third-quarter profit of just $1.65, compared with the prior view of $3 a share.

The New York attorney general's office is probing the relationship between Fidelity Investments and Goldman Sachs over the sale of auction-rate securities, a person familiar with the investigation told the Wall Street Journal.

Citigroup may consolidate some midtown Manhattan offices and ordered employees to pare expenses such as unnecessary color copies, as the largest bank in the United States struggles to cut costs.

The number of problem banks on a regulatory watch list increased to 117 by the end of the second quarter from 90 at the end of the first quarter, the Federal Deposit Insurance Corp said Tuesday.

The FDIC itself might have to borrow money from the Treasury to cope with the wave of bank failures, according to a Wall Street Journal report. But such a scenario was unlikely in the "near term," FDIC Chairman Sheila Bair told the paper.

Elsewhere, Amylin Pharmaceuticals shares were under pressure early after downgrades that followed news that four more people died taking the company's diabetes drug Byetta, bringing the total to six. Amylin shares were off more than 12 percent premarket.

Meanwhile, a jury awarded Mattel $100 million in damages in a federal copyright lawsuit that pitted the house of Barbie against MGA Entertainment, the maker of the Bratz dolls.

Asian stocks closed mixed, in volatile trading, while European markets were also dragged lower by banks, despite a rebound in energy companies.

THIS WEEK:

MONDAY-THURSDAY: Democratic National Convention in Denver

WEDNESDAY: Weekly mortgage applications; durable goods; Fed's Lockhart speaks; weekly crude inventories; Report from Chicago Fed; Earnings from American Eagle, Dollar Tree
THURSDAY: Jobless claims; GDP, corporate profits; natural-gas inventories; Earnings from Sears Holdings, Tiffany and Dell; Barack Obama's acceptance speech
FRIDAY: Personal income and spending; Chicago manuf. report; consumer sentiment; farm prices

WATCHERS: McCain VP announcement

Send comments to cindy.perman@nbcuni.com.