US STOCKS-Wall St set for strong open after tax cut deal

Tue Dec 7, 2010 8:49am EST

 * Deal to extend tax cuts boosts futures
 * Oil futures rise to 2-year high, Chevron gains
 * Ireland expected to pass austerity budget
 * Futures up: S&P 11.9 pts, Dow 82 pts, Nasdaq 23.75 pts
 * For up-to-the-minute market news see [STXNEWS/US]
  (Recasts, adds details)
 By Leah Schnurr
 NEW YORK, Dec 7 (Reuters) - Wall Street was set to rise
strongly on Tuesday as investors bet that a deal to extend tax
breaks will prompt increased spending and buoy the economy.
 U.S. President Barack Obama announced the deal to renew
Bush-era tax cuts for wealthier Americans -- as Republicans had
wanted -- as well as the middle class. The deal was expected to
extend breaks on dividends and capital gains. For details, see
 Investors have said the tax cuts were necessary to keep the
fragile economic recovery on track as the cuts could lead to
more spending and investing. Keeping the capital gains tax
steady could make investors less inclined to sell shares. The
Financial Select Sector SPDR exchange-traded fund (XLF.P) rose
1.1 percent.
 "From a psychological standpoint, this probably will
continue to boost the markets in the sense that this most
likely will lead to an expansion in economic activity," said
Peter Cardillo, chief market economist at Avalon Partners in
New York.
 "People are going to be feeling a little bit better, and
that means they'll be maybe even spending a little bit more."
 S&P 500 futures SPc1 rose 11.9 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 DJc1 gained 82
points, and Nasdaq 100 futures NDc1 added 23.75 points.
 Commodities were up, with oil futures CLc1 climbing above
$90 a barrel for the first time in 26 months. Chevron Corp
(CVX.N) was up 1.1 percent at $85.85 before the opening bell.
 Futures shrugged off disappointment there was no further
action out of the euro zone to deal with its debt crisis. After
a five-hour meeting Monday, ministers said they would not
introduce any measures to tackle the threat of contagion.
 But in a positive sign, Ireland was expected to pass a
record austerity budget through parliament, averting the risk
of a snap election that could have plunged the country into a
deeper crisis. [ID:nLDE6B60DA]
 China is likely to raise interest rates in the coming days
in a demonstration of the government's resolve to tame
inflation, an official newspaper reported. [ID:nTOE6B602F]
 Investors are looking to China to help drive global
economic growth, and moves to rein in its economy have been
negative for the market. However, Cardillo said the worries
have already been priced in and shouldn't derail the rally.
 The U.S. government sold its remaining shares in Citigroup
Inc (C.N) for $4.35 apiece, marking an exit from ownership in
the bailed-out bank, with a $12 billion gross profit for
taxpayers. Its shares rose 2.9 percent to $4.58 after earlier
trading lower. [ID:nN06234751]
 Talbots Inc TLB.N sank nearly 24 percent to $8.68 in
early electronic trading after the retailer cut its full-year
forecast. [ID:nN07265459]
 Stocks ended flat Monday as worries about Europe's
situation frustrated investors. Analysts still see the S&P 500
breaking out of its recent range soon and surpassing an
intraday high for the year just above 1,227 reached on Nov. 5.
The S&P closed at 1,223.12 on Monday.
  (Editing by Jeffrey Benkoe)

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