Stocks jumped at the opening bell following better-than-expected reports on GDP and jobless claims even though the GDP reading indicated that the economy is likely in a recession.
The Dow Jones Industrial Average rocketed about 200 points in the first few minutes of trading, after shedding 74 points in the previous session.
"It looks less and less likely that we’re going to get a significant retest and/or break of the lows," Art Cashin, director of floor operations at UBS, told CNBC. "This rally looks like it might have some legs."
Cashin cited two key levels in the S&P 500: 970, yesterday's high, and 985, which the index needs to break through in order to get some conviction in this rally.
Still, he said, we're just seeing the tip of the iceberg in terms of recession.
"I do think before a year from now … the full effect of the recession will begin to hit. That hasn’t even been thought of really yet," Cashin said.
Indeed, the formal definition of recession is two consecutive quarters of negative GDP growth and today we got the first half of that equation: The economy contracted at a 0.3 percent annual ratein the third quarter, the Commerce Department reported in the first of three readings on GDP for the quarter. That was the weakest growth rate since 2001 but still beat expectations, which called for a 0.5-percent decline.
"This is the first of a run of negative GDP numbers; the economy is in recession," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. His team expects GDP to have dropped 1 percent in both the fourth quarter and the first quarter of 2009.
Meanwhile, initial jobless claims held steady at 479,000 last week; economists had expected the gauge to drop to 475,000.
In corporate news, Exxon is due to report results before the bell and analysts surveyed by ThomsonReuters expect it to post earnings per share of $2.38 in the third quarter. Shares were nearly 2 percent higher in premarket trading ahead of the earnings release.
The big rise in futures comes a day after the Federal Reserve slashed the fed funds rate by half a percentage point as it seeks to revive an economy hit by a long list of maladies stemming from the most severe financial crisis in decades.
A $600 billion plan is being hammered out by the Federal Deposit Insurance Corp and the U.S. Treasury that could provide guarantees for up to 3 million at-risk mortgages, offering much-needed relief to homeowners, according to Reuters.
And New York Attorney General Andrew Cuomo is demanding information about executive compensation and bonuses at nine banks that have received federal funds under the Treasury's bailout program.
In a letter to each bank's Board of Directors, Cuomo warns the bonuses could violate New York's state fraudulent conveyance law.
Asian stocks surged, with Japan leaping by 10 percent, while in Europe shares were also higher as risk appetite tiptoed back into markets.
Taiwan, Hong Kong and a number of Gulf countries followed suit.
Still to Come:
THURSDAY: Weekly natural-gas inventories; Eanrings from Electronic Arts after the bell
FRIDAY: Personal income and spending; consumer sentiment; Fed's Yellen speaks; Earnings from Chevron, Clorox and Nissan
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