Wall Street set for New Year gain after bleak 2008

U.S. stock index futures pointed to a rise on Wall Street's first trading session of the new year, but volumes were expected to be thin with a few investors at work following the January 1 holiday and ahead of the weekend.

After suffering their worst year since the 1930s, undermined by fears of a long and deep recession, market analysts were trying to focus on what the New Year held in store.

"It is pretty shocking, about what happened, but you have put that behind you and figure out where the economy and business is going next," said Kim Caughey, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

She said investors were watching closely for more signs of how President-elect Barack Obama will try to jolt the U.S. economy out of its worst slump in decades.

Obama is due to meet leaders in Congress on Monday to discuss his stimulus plan. Some Republicans are worried that their Democratic rivals could expand it to as much as $1 trillion.

At 7:58 a.m., S&P 500 futures and Dow Jones futures were up 0.5 percent and Nasdaq 100 futures were up 0.4 percent.

U.S. stocks rose on Wednesday, before the January 1 holiday, taking the Dow's recovery since touching an 11-year low on November 20 to nearly 22 percent and adding to some hopes that the worst of the stock market rout could be over.

In 2008 as a whole, the Dow fell 33.8 percent, for its bleakest year since 1931; the S&P skidded 38.5 percent; and the Nasdaq posted its worst year ever, with a 40.5 percent drop.

But Caughey of Fort Pitt Capital warned that more bad news was expected from corporate earnings, possibly through the second quarter.

The market on Friday could be helped by the end of selling pressure in December typically caused by investors seeking to offset losses under U.S. tax rules in the last month of the year, she said.

Oil companies were likely to be in focus, as prices fell as much as 8 percent on Friday, kicking off 2009 on a weak note as traders bet a late-day rally that drove up prices 14 percent on Wednesday was overdone.

The U.S. government on Wednesday paid out the first $4 billion in emergency loans to support General Motors Corp but a parallel rescue payment for Chrysler LLC was on hold until the new year.

Chrysler said it remained in talks with the U.S. Treasury to finalize its own $4 billion loan agreement and expected to receive its share of the funding soon.

On the macro front, investors were waiting for the Institute of Supply Management index, due at 10 a.m..

The ISM is expected to report that its index of national factory activity dropped to 35.5 in December from 36.2 in November, according to the median forecast of 69 economists polled by Reuters.

A reading below 50 indicates a contraction in the sector. The reading for November was the weakest since 1982.

(Editing by Tom Hals)