Stocks Pushed Higher By Auto Bailout
U.S. stocks looked set for a sharp jump higher at the open Wednesday, as a looming deal to bail out Detroit auto makers raised investor enthusiasm for the industry.
The Big Three automakers appeared to have secured a $15 billion bridging loan after the White House and congressional Democrats reached an agreement in principle after weeks of wrangling, according to officials.
A so-called 'Car Czar' will be put in place to negotiate a restructuring of General Motors, Ford and Chrysler by March 31.
"Any little bit of bargain hunting will be able to take the stock market higher," Daniel Frishberg, chief investment strategist at Laffer Frishberg, told "Worldwide Exchange."
GM shares gained more than 6 percent in premarket trading, while Ford rose about 2.5 percent.
Elsewhere, investors were looking to bargain-hunt following a sizeable drop in the indexes Tuesday. Futures were well off their morning highs though still indicating positive despite continued economic headwinds.
"We could be looking at a medium-term rally," Frishberg said, adding that stocks are technically oversold.
But there was still a bounty of bad news to temper enthusiasm.
Video-game maker Electronic Arts was the latest company to slash its earnings outlook, joining FedEx and Texas Instruments in resetting its targets lower.
Electronic Arts shares tumbled nearly 10 percent premarket.
Eastman Kodak shares also were getting pummeled after the company pulled its forecast and said it will try cutting costs by eliminating management salary increases next year. Shares plunged more than 16 percent premarket.
In the bond market, the scramble to safe-haven assets has pushed some Treasury yields to below zero, meaning many investors have paid for the U.S. government to borrow their cash.
Four-week bills were sold at a high rate of 0.000 percent in a $30 billion auction, the U.S. Treasury Department said, a level never before seen.
Also in financial news, insurance giant American International Group owes around $10 billion to other financial services firms for trades that have gone sour, according to a report from the Wall Street Journal citing sources familiar with the situation.
The report said that the trades would not be covered by the terms of the current $150 billion U.S. government rescue package. AIG shares fell more than 5 percent premarket.
In economic news, mortgage applications eased after last week's record gains, dipping 7.1 percent after doubling the week before after a huge tumble in interest rates. At the same time, Wells Fargo CEO John Stumpf said he is seeing signs that real estate prices may be bottoming. Stumpf made the remarks at a Goldman Sachs-sponosred investment conference during which he also said employment will now be the economy's biggest obstacle.
October's wholesale trade numbers will be out at 10 am.
Also at 10 am, the House Financial Services Committee is holding a hearing on the subject of TARP oversight.
U.S. oil inventory data is released at 10:35 am.