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Bank Stocks May Rise Ahead of Stress Test

Banking stocks looked set to continue their sharp jump higher at the open Thursday as investors wait for the official results of the government’s stress test.

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  • Bank of America, Wells Fargo and Citigroup all ended Wednesday’s session more than 15 percent higher. Citi shares were more than 9 percent higher in pre-market trading, while BoA shares rose 8 percent before the open.

    General Motors shares also were higher, gaining 6 percent after the troubled automaker reported a net loss of $9.78 a share that beat analyst estimates. GM burned through $10 billion of cash in the previous quarter.

    And Wal-Mart saw its shares rise nearly 4 percent after the world's biggest retailer posted same-store sales that increased 2.4 percent, a substantial beat over Wall Street expectations.

    Futures got a small boost also from government numbers showing that initial jobless claims fell more than expected, to their lowest level since January.

    Insurer American International Group was preparing to release its earnings results after the market close, but traders rendered their verdict on the company's prospects by sending shares up 12.5 percent premarket. AIG is expected to post a 5 cent per-share loss.

    But Britain's third biggest bank Barclays saw its domestically traded shares fall 5 percent premarket even as the company reported a 12 percent gain in profit.

    And CNBC.com-parent General Electric saw its shares rise nearly 3 percent premarket after Barclays raised the price target for the company to $15 from $10 and raised its rating to "overweight."

    Elsewhere in earnings, SiriusXM shares fell more than 8 percent after the satellite radio company posted a quarterly loss but raised its outlook. Shares initially soared more than 20 percent but backed off as traders pored through the results.

    European markets were also boosted by banking stocks, but attention was firmly on interest rate and policy decisions from the European Central Bank and Bank of England. The ECB is expected to cut rates to 1 percent, while the BoE is seeing leaving rates on hold at 0.5 percent.

    Investors are watching closely for announcements of alternative easing methods from the central banks.

    The government’s stress tests came under severe criticism from market experts. Nouriel Roubini, co-founder and chairman at RGE Monitor, told CNBC that the tests aren't stressful enough, while banking analyst Bert Ely said “this whole process has been a fiasco.”

    Treasury Secretary Timothy Geithner sought to ease fears before the results by saying that none of the 19 banks being tested faced the risk of insolvency.

    In the retail space, Costco Wholesale kicked off same store sales reporting and said that, excluding a negative impact from falling fuel costs and foreign exchange, its numbers were flat in April.

    Meanwhile, Federal Reserve Chairman Ben Bernanke is due to speak at the Chicago Fed Conference at 9:30 am New York time. FDIC Chairman Sheila Bair will speak at the same conference at 1:40 pm.

    On the economic front, preliminary non-farm productivity data for the first quarter is due out at 8:30 am. Jobless claims for the week ended May 2 are also due to be released at 8:30 am. And March consumer credit figures are out at 3 pm.

    The Labor Department's April jobs number is due out on Friday. Economists expect it to show that 600,000 jobs were shaved from nonfarm payrolls and that the unemployment rate jumped to 8.9 percent from March's 8.5 percent, according to Reuters.