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Third quarter ratecut Original Source Link: (May no longer be active)
http://story.news.yahoo.com/news?tmpl=story2&cid=568&ncid=749&e=1&u=/nm/20021031/bs_nm/markets_stocks_dchttp://story.news.yahoo.com/news?tmpl=story2&cid=568&ncid=749&e=1&u=/nm/20021031/bs_nm/markets_stocks_dc
Stocks Set to Rise as Rate Cut Hopes Grow
18 minutes ago
By Haitham Haddadin
NEW YORK (Reuters) - Stocks are set to open slightly up on Thursday as a weaker-than-expected reading on U.S. economic growth in the third quarter bolstered hopes the Federal Reserve (news - web sites) would come to the rescue with an interest-rate cut next week.
Also adding to recent signs that the U.S. recovery may be not as robust as believed, the number of Americans signing up for unemployment benefits rose above expectations last week by 16,000 to 410,000.
"I think the market is looking forward to a possible Fed rate cut and to possibly better earnings," said John Hendricks, market strategist with State Street Global Markets.
U.S. economic growth pushed ahead during the third quarter at more than twice the anemic rate posted in the second quarter, the Commerce Department (news - web sites) reported on Thursday. But the pace was weaker than expected.
Gross Domestic Product, which measures total output within U.S. borders and is the broadest gauge of total economic performance, climbed at a 3.1 percent annual rate in the three months from July to September, well ahead of the preceding quarter's 1.3 percent rate.
Ahead of the release of the data, equity index futures were mixed. But all three contracts took a turn to into the negative right after the news hit before rebounding a little into the positive. The Nasdaq 100 contract was last up 5.50 points at 996.50, having fallen a similar amount earlier. Standard & Poor's 500 futures were up 3.10 points at 892.70. Dow futures were up 14 points at 8,424.
Now, speculation is mounting the Fed may cut rates to boost the sluggish economy, when it meets next week. A rate cut next week would be the Fed's first rate reduction to aid the flagging U.S. economy since slashing borrowing costs 11 times in 2001 and dragging rates to a 40-year low of 1.75 percent.
"While we had lots of negative news recently like the durable goods orders and jobless claims, right now the market is focused on ways to fix the economy which may have bottomed out but needs further stimulus," said Alan Ackerman, market strategist with Fahnestock & Co.
"These GDP (news - web sites) numbers are another reason for the Federal Reserve to move at its meeting next week."
Stocks climbed on Wednesday as Wall Street applauded comments from the head of International Business Machines Corp. about a possible economic uptick, and celebrated after strong quarterly results from semiconductor companies.
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In extended hours trading after Wednesday's close, shares of Electronic Data Systems Corp. jumped, pulling shares of competing computer services providers higher as well, after EDS posted results that beat its lowered forecasts. The company also pledged to cut costs by reducing its global work force by 3 percent to 4 percent.
EDS, the No. 2 services company behind International Business Machines Corp., rose to $14.50 early Thursday on Instinet from a close of $13.75. Shares of EDS rivals also rose, such as Dow component IBM, up at $79 from $78.67, and Computer Sciences Corp. up at $31.55 in after-hours trade from its NYSE close at $31.32.
PacifiCare Health Systems Inc. soared to $28.76 from its Nasdaq close at $24.42, after the largest Medicare health plan provider said quarterly profit more than doubled as it kept premiums in line with medical costs. More than 293,000 shares traded after the close.
But shares of Albertson's Inc. sank to $22.88 pre-open on Instinet from a close of $27.42. The No. 2 U.S. grocery store operation, cut its forecasts for third-quarter and full-year 2002 earnings late on Wednesday, citing an unexpectedly steep decline in sales.
In other earnings news, Aetna Inc., the second-largest U.S. health insurer, said it swung to a third-quarter profit as it increased premiums to keep pace with medical costs. Shares ended at $40.96 Wednesday.
Wall Street also gets a report on the manufacturing sector in the Midwest, expected about half an hour from the open.
On Wednesday, the Dow Jones industrial average closed up 58.47 points, or 0.7 percent, at 8,427.41. The broader Standard & Poor's 500 Index closed up 8.56 points, or 0.97 percent, at 890.71. The technology-laced Nasdaq Composite Index advanced 26.19 points, or 2.01 percent, to 1,326.73.
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