Futures cut their gains in half after two economic reports — jobless claims and durable-goods orders — missed their targets and General Electric lowered its outlook.
But they still pointed to a higher open for Wall Street as hopes for progress on the government's proposed bailout for the financial system grew, despite uncertainty about how the $700 billion plan would work.
If a deal gets passed, ""It bides us time," Warren Meyers of Walter J. Dowd, told CNBC. "It doesn't solve the underlying problems but it gives us time to look at them and try and solve them ... that will slowly build confidence" in the market, he said.
On the economic front, jobless claims jumped by 32,000last week, more than the 20K jump expected. Durable-goods orders fell by 4.5 percent, nearly three times the 1.6-percent drop expected. A lot of that was due to a drop in demand in the volatile transportation sector, which fell 3 percent, when economists had expected a 0.5-percent drop.
Still to come is a report on new-home sales at 10 a.m. ET.
Dow component and economic bellwether General Electriccut its earnings outlook for the third-quarter and full year and halted its buyback plans because of turmoil in the financial services markets.
The CNBC.com parent said it would earn between 43 cents and 48 cents per share in the third quarter, down from a previous outlook of 50 cents to 54 cents. Shares dropped more than 5 percent in premarket trading.
For the full year, it said it would earn $19.5 billion to $21 billion, or $1.95 to $2.10 per share, from its previous forecast of $22 billion to $23 billion, or $2.20 to $2.30 per share.
Meanwhile, President George W. Bush called an emergency meeting to discuss to the bailout plan as Congress looked closer to approving the controversial and highly politicized market intervention.
The old saying "cash is king" became fashionable again as experts warned in times like these investors should take refuge in safety.
Stocks had struggled to find direction Wednesday as uncertainty about the deal and whether it would be approved in time made investors anxious. Meanwhile interbank lending remained extremely strained as banks sought to hold onto cash reserves.
UBS shares surged about 5 percent on chatter that HSBC is prepared to make a bid on the Swiss bank, even though sources have told Reuters otherwise.
On the earnings front, credit-card giant Discover Financial and drugstore-chain Rite Aid are both due to deliver numbers before the bell.
The Chicago Federal Reserve and European Central Bank conference on credit market turmoil will be ongoing throughout the day, with Charles Evans, Kevin Warsh, Charles Plosser all set to make appearances.
And Dallas Fed President Richard Fisher will speak on market turbulence at 7.30 pm.
STILL TO COME:
THURSDAY: Paulson testifies; Chicago, Dallas Fed presidents speak; jobless claims; durable goods; new home sales; natural-gas inventories; Kansas City Fed manuf. report; Earnings from Discover, Rite Aid and Research In Motion
FRIDAY: St. Louis Fed pres. speaks; Last look at Q2 GDP, corporate profits; consumer sentiment; Earnings from KBHome
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