Futures Rally on Auto Bailout, Global Action
Growing hopes of a federal bailout for the auto industry and increased action by world governments to stem the global recession pushed stock index futures higher Monday.
Stocks were posed to gain more than 2 percent as legislators continued to work with leaders of the Detroit auto makers to craft a deal. The move higher would continue Friday's rally, when stocks shot up in the final hour of trading on the back of promises from politicians across the globe to do more to stimulate ailing economies.
Asian markets surged, with the Nikkei closing more than 5 percent higher, while European stocks were also soaring in morning trading.
Democratic Congressional leaders said Friday that they were ready to provide a short-term rescue plan for American automakers, and that they expected to hold a vote on it in a special session next week.
The plan, likely to be in the $15 billion range, is expected to include a Cabinet-level oversight board and a provision that the government could take the money back if the auto companies aren't taking sufficient steps to change the way they operate.
The rescue funds would come from an existing loan program originally tageted at helping build fuel-efficient vehicles.
Ford shares rose more than 17 percent in premarket electronic trading, while GM soared 25 percent.
The Swedish government is expected to offer loans and loan guarantees worth several billion Swedish crowns to struggling U.S.-owned car makers Volvo Cars and Saab Automobile, a local newspaper reported citing an unidentified source.
Volvo Cars is owned by Ford and Saab by General Motors. Both companies said they wanted to sell the units and held talks with the Swedish government.
President-elect Barack Obama, who takes office on Jan. 20, 2009, began outlining his economic recovery plan on Saturday, saying he aims to create at least 2.5 million new jobs by 2011 and launch the largest U.S. infrastructure investment since the 1950s.
On Sunday, Obama said he would put strong financial regulation at the center of his economic recovery program to force more accountability in the banking industry.
Layoffs are expected to continue in the financial sector, draining millions of tax dollars from states' coffers and swelling the ranks of the unemployed.
Meanwhile, Merrill Lynch Chief Executive John Thain has suggested to directors that he get a 2008 bonus of as much as $10 million, because, by merging with Bank of America, he helped avert what could have been a much larger crisis at the investment bank, according to the Wall Street Journal.
In the aerospace sector, JP Morgan Securities cut its price target of Dow component Boeing to $42 from $46 on concerns over the further delay of the 787 Dreamliner and damage from a two-month machinists strike. Boeing shares, though, gained 1.2 percent premarket.
The gloomy outlook also caused JP Morgan to cut targets for two of Boeing's suppliers, Precision Castparts and Rockwell Collins.
Fellow Dow component 3M shares were under pressure after the company confirmed layoff plans--it will cut nearly 1,800 positions--and slashed its 2009 outlook. Shares were off 2.4 percent premarket.
In a sign the financial crisis is spreading to the media sector, publisher and broadcaster Tribune is preparing for a possible bankruptcy-protection filing as soon as this week, according to the paper.
The New York Times is planning to borrow $225 million against its mid-Manhattan headquarters building, to ease a potential cash flow squeeze, the New York Times reported on its Web site.
And elsewhere in corporate news, Christie Heffner is expected to step down from her role as chairman and CEO of Playboy Enterprises, where shares have plunged 82 percent in the past year.