Stocks were poised to open higher Wednesday after reports on the labor market and consumer spending pointed to an improving economy and as investors shifted their focus away from tensions between the two Koreas and European debt worries.
The number of people applying for unemployment benefits fell sharply last weekto the lowest level since July 2008, a hopeful sign that improvement in the job market is accelerating. The Labor Department said that weekly unemployment claims dropped by 34,000 to a seasonally adjusted 407,000 in the week ending Nov. 20, while analysts expected a much smaller drop.
Stocks were hammered in the previous sessionafter North Korea fired artillery shells on an island in South Korea Tuesday, causing deaths and sparking widespread condemnation.
The situation in Korea would likely mean continued volatility for the coming days and possibly weeks, Shaun Cochran, head of research of CLSA, told CNBC.
"In our portfolios we are positioning for that increased volatility, we're not seeing this as an immediate buying opportunity," Cochran said.
But Richard Kim, head of Korean sales at Auerbach Grayson, said investors could earn trading profits of 20 percent short-term on certain Korean stocks.
Trading volume is expected to be light ahead of the Thanksgiving Day holiday on Thursday.
In Europe, stocks were mixed with investors concerned that Ireland's debt problems could spread to other euro-zone countries. Ireland's government is due to detail its plans on how to save $19.95 billion over the next four years.
Meanwhile, Ireland is set to part nationalize one if its key financial institutions, Bank of Ireland. S&P downgraded Ireland's rating to A from AA- late Tuesday.
Asian stocks ended mostly in the red, but off earlier lows. China's indexes managed to secure strong gains.
The dollar found strength as investors sought its relative safety; gold and oil were mostly flat.
The single European currency is not in danger, the president of the euro zone's group of finance ministers Eurogroup Jean-Claude Juncker told CNBC in an interview. European Central Bank Governing Council member Yves Mersch said the ECB will be able to gradually phase out its measures to support the economy.
Also on the economic front, U.S. mortgage applications rose to their highest level in more than six months last week, buoying activity otherwise weighed down by waning refinancing, according to the Mortgage Bankers Association.
But new orders for U.S. manufactured goods unexpectedly fell in October to post their largest decline in nearly two years and business capital spending plans dropped, according to the Commerce Department that pointed to a slowdown in factory activity.
And U.S. consumer spending rose for a fourth straight month in October and a key inflation gauge was at a record low, according to the Commerce Department, strengthening the Fed's defense of its decision to loosen monetary policy further.
In other economic news, the Thomson Reuters/University of Michigan final November consumer sentiment index is expected to be reported at 9:55 am EST and new home sales for October are to be reported at 10 a.m. EST.
In the day's earnings news, Deere was up slightly in premarket trading after the world's largest maker of farm equipment after it reported stronger-than-expected quarterly profit and forecast 2011 earnings below expectations.
Upscale jeweler Tiffany posted profit and sales that handily beat estimates and said it expects strong holiday sales.
Guess shares jumped in premarket trading after the apparel company reported a quarterly profit that far exceeded expectations helped by robust expansion overseas.
BP shares rose slightly in premarket trading after the oil giant announced a "significant" natural gas discovery in Egypt's West Nile delta.
Meanwhile, Caterpillar , the US-based manufacturer of earth-moving equipment, is marketing a two-year 1 billion renminbi bondto institutional investors in Hong Kong, becoming the first foreign industrial multinational to issue debt in the Chinese currency.
Oracle was up in premarket trading after Germany's SAP was ordered to pay the tech giant $1.3 billion for software theft.
On Tap This Week:
WEDNESDAY: Consumer sentiment, new home sales, oil inventories, 7-yr note auction
THURSDAY: Thanksgiving Holiday — All markets closed
FRIDAY: Black Friday — NYSE early close
More From CNBC.com: