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Firmer start seen for Wall Street as claws back losses

Wall Street stocks are set for a firmer start to Thursday's session as they claw back some of the previous session's sharp losses.

business Updated: Jun 21, 2007 20:19 IST
Sophie Hares

Wall Street stocks are set for a firmer start to Thursday's session as they claw back some of the previous session's sharp losses, but a cautious tone could prevail as bond market worries continue to grip investors.

By 1021 GMT, stock futures for the Dow Jones industrial average were up 0.2 per cent, while S&P 500 futures gained 0.3 per cent and Nasdaq added 0.1 per cent.

"We've only seen a minor correction but people will start to be more and more concerned about the direction of interest rates. It starts to be tempting to take some profits and to move to risk-free," said Johan Van Der Biest, fund manager at Dexia.

US stocks fell on Wednesday, as a drop in oil prices dragged down energy shares, and a possible collapse of two big hedge funds hit investment banks.

The Dow Jones industrial average closed down 146.0 points, or 1.1 per cent, at 13,489.42. The Standard & Poor's 500 was down 1.4 per cent while Nasdaq was down 1.0 per cent, at 2,599.96.

The benchmark 10-year Treasury note yielded around 5.14 per cent in European trade, little changed from late in the US session, and well off the 5.33 per cent five-year high reached on June 13.

Weekly jobless data at 1230 GMT, followed by leading indicators for May at 1400 GMT and the Philadelphia Fed report at 1600 GMT feature on the US economic schedule.

AES and Tektronix are among S&P500 companies scheduled to post results on Thursday.

Oil climbed on Thursday, with London benchmark Brent crude up 0.8 per cent at $70.96 a barrel after dropping $1.42 on Wednesday.

Prices touched a 10-month high of $72.25 on Monday.

Banks in spotlight

Investment banks are expected to remain in sharp focus after falling sharply on Wednesday as Bear Stearns struggled to keep afloat two hedge funds that suffered big losses on securities tied to the subprime mortgage market.

Merrill Lynch & Co Inc, a main lender to the funds, sold off assets seized from the funds, and three other banks closed out their positions with them.

"If you look at the general earnings pictures for the brokers and capital markets, earnings remain excellent and they're in a position where they can afford some misses or some headwinds," said Dexia's Van Der Biest.

In corporate news, Morgan Stanley raised the biggest property fund ever, an $8 billion warchest aimed mainly at Asian markets including Japan, China and India.

Sunglasses maker Oakley was expected to be in focus after Italy's Luxottica agreed to buy it in a $2.1 billion all-cash deal.

Among companies reporting results, H&R Block Inc, the largest US tax preparer, said its quarterly net income from continuing operations rose 9 per cent, helped by a strong performance at its consumer financial services division.