Stocks were looking for a sharply positive start to the week Wednesday, as lawmakers prepared to move ahead on an $825 billion economic stimulus plan and banks were set for a nice rally.
The House of Representatives has worked out its differences with the White House over the plan and is expected to pass President Obama's plan to kick-start the economy with a batch of infrastructure and capital spending projects.
Republicans objected to a slew of spending proposals, but the administration appears to have enough votes to get the plan through the House and let Senate leaders begin working on their version.
Early earnings showed a mixed bag, with companies reporting lower profits but investors looking for positive nuggets amid the gloom.
Wells Fargo shares surged more than 17 percent premarket even after the bank reported a loss of 79 cents per share.
The Financial Select SPDR exchange-traded fund gained more than 9 percent premarket as traders looked for the sector to get a big boost.
Investors also looked to a key policy meeting of the Federal Open Market Committee for more action to stem the credit crisis.
The Fed has effectively run out of ammunition in terms of interest rate cuts, so focus will shift to the accompanying statement. Some analysts believe the Fed could unveil new steps to combat the ongoing crisis, including the printing of money.
The FOMC is due to issue the statement at 2:15 pm New York time (7:15 pm London time).
Obama could also be finalizing a “bad bank” plan to unburden bank’s balance sheets from their most toxic and illiquid assets, according to industry sources.
In corporate news, Citigroup named Michael Corbat as interim chief executive of its new Citi Holdings business and said one-third of its employees will work in the unit.
Political and business leaders from around the globe gathered at the World Economic Forum in Davos, Switzerland, to discuss the state of the economy and the potential road to recovery. Obama will not be attending the meeting.
US and global stocks are still likely to fall because of worse-than-expected corporate and economic news, Nouriel Roubini, RGE Monitor Chairman, told CNBC in Davos.
Corporate earnings will continue to filter through with AT&T, Boeing and Wells Fargo all reporting before the opening bell.
After the bell on Tuesday, Yahoo beat Wall Street expectations with its rise in fourth-quarter profit and Sun Microsystems posted a smaller-than-expected quarterly loss.
In economic news, mortgage applications fell to November levels after a tick higher in interest rates discouraged potential home buyers. The news came during a modestly positive week for housing, with previous reports showing a gain in home buying and a drop in prices that was a bit less than analysts expected.