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US STOCKS-Wall Street to tick up at open as earnings roll in

Published 10/20/2010, 09:23 AM
Updated 10/20/2010, 09:28 AM

* Boeing rises more than 2 percent after results

* U.S. dollar slips as China rate impact wanes

* Futures up: Dow 15 pts; S&P 1.4 pts; Nasdaq 5 pts (Updates prices, changes quote)

By Rodrigo Campos

NEW YORK, Oct 20 (Reuters) - Wall Street was set to rise slightly at the open on Wednesday as the focus returns to corporate earnings and as fears dissipate about the effect of an interest rate increase in China.

Futures recovered after a steep sell-off in stocks on Tuesday, triggered by China's policy tightening and fears banks might be on the hook for billions of dollars in soured mortgage bonds.

Boeing Co shares rose more than 2 percent in premarket trades after the aerospace company and Dow component posted a quarterly profit that beat Wall Street's expectations and it boosted its full year forecast.

"The focus today will be on earnings and guidance," said Robert Lutts, chief investment officer at Cabot Money Management in Salem, Massachusetts.

"What you need now out of earnings is (corporate) expectations to be raised," he said. He added, however, that he is "not sure many executives will stick out their neck and make investors feel the future will be better."

S&P 500 futures rose 1.4 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 15 points, and Nasdaq 100 futures added 5 points.

Tuesday's slide took the S&P 500 below a key technical barrier breached last week. If the index is unable to bounce back above 1,173 it could be considered a technical failure, a bearish signal that could trigger further selling.

Daily trading volume has picked up in the last few sessions, with more than 9 billion shares moving on the New York Stock Exchange, the NYSE AmEx and Nasdaq in four of the last five days, above the year's average.

"Liquidity in the system is extremely positive for equities right now," said Lutts. "Our next bull market is going to be other than bonds."

Several U.S. Federal Reserve officials indicated on Tuesday the central bank will soon offer further monetary stimulus to the economy. One policymaker said $100 billion per month in bond buys may be appropriate.

Expectations the Fed will print more money have been pivotal in a stocks rally that has lasted for almost two months.

General Electric Co, Honeywell International Inc and United Technologies Corp are among the suitors for BAE Systems Plc's aerospace unit that could fetch up to $2 billion, sources said.

Due later in the day is the Fed's Beige Book, a summary of economic conditions gathered from its 12 regional banks, expected at 2 p.m. (1800 GMT).

The U.S. dollar fell against a basket of currencies as the appetite for higher-yielding currencies stabilized after being jolted by China's rate hike. The index was off 0.6 percent.

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