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US stocks-Futures rise on Home Depot, earnings in focus

US stock futures rose on Wednesday, with Home Depot Inc's plan for a $22.5 billion share buyback set to underpin demand for equities.

business Updated: Jun 20, 2007 18:31 IST
Ellis Mnyandu
Ellis Mnyandu

US stock futures rose on Wednesday, with Home Depot Inc's plan for a $22.5 billion share buyback set to underpin demand for equities while investors await a batch of earnings reports, including Morgan Stanley's.

Shares of Home Depot, a component of the Dow Jones industrial average were up 5.2 per cent in Europe.

The home improvement chain announced its share repurchase plan late on Tuesday, when it also said its board had approved a $10.3 billion sale for its supply unit.

But even with the boost from Home Depot, investors could tread cautiously, with recent increases in oil prices and moves in benchmark Treasury bond yields staying in focus.

Even though bond yields have retreated in recent sessions, concerns about the outlook for interest rates still linger in the market, said Peter Dunay, investment strategist at Leeb Capital Management in New York.

"The fear of combining higher interest rates, even though they have eased a little bit, with higher energy prices is going to be a little bit of a test for the market," he said.

"People are beginning to gear up for the earnings reporting season. We don't want to see too much weakness."

S&P 500 futures were up 3.60 points, but 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 were up 37 points while Nasdaq 100 futures were up 6 points.

Also due to post earnings before the bell was package delivery company FedEx Corp, a company seen as an economic bellwether. Circuit City Stores is also due to post results, a day after top rival electronics chain Best Buy Co Inc missed profit forecasts.

In other corporate news, the Wall Street Journal reported that two Bear Stearns Cos hedge funds that invested heavily in securities backed by subprime mortgage loans close to being shut down as a rescue plan is falling apart.

Merrill Lynch & Co, one of the hedge fund's lenders, will move to seize collateral from the two funds and sell it, the Journal reported, citing unspecified documents.

US stocks edged higher on Tuesday as a dip in Treasury bond yields eased investors' interest-rate worries and boosted financial stocks.

However, gains were tempered by weaker-than-expected earnings from Best Buy, which raised concerns about the health of consumer spending.

First Published: Jun 20, 2007 18:10 IST