By Edward Krudy
NEW YORK (Reuters) - Wall Street was set to jump on Thursday after remarks by Europe's central bank chief about protecting the euro zone from collapse helped reassure a market already expecting the Federal Reserve to step up stimulus efforts.
European Central Bank President Mario Draghi pledged on Thursday to do whatever was necessary to protect the euro zone from collapse, including fighting unreasonably high government borrowing costs. The comments caused an immediate spike in global stock and commodity markets.
Policy makers have made similar statements about saving the euro before, but if these latest remarks are realized in decisive intervention in European bond markets, investors hope it could spur a sizable "risk-on" rally in stocks.
Shares in sectors more sensitive to risks in Europe and slowness in the economy, such as materials and financials, looked set to lead the market. Morgan Stanley
"The overarching concern over the last week or so has been that the euro zone is slowly melting into the Mediterranean," said Art Hogan, managing director of Lazard Capital Markets in New York. "To have Draghi come out and say, listen we are keeping this together ...is going to add support to the market that is otherwise not there.
"Remember, though, that the ECB can't do this alone; he's going to have to have support from Germany and we'll see if that's forthcoming," said Hogan.
Hopes that the Federal Reserve will boost efforts to stimulate a flagging economy, maybe with a decision to do so as early as at its rate-setting meeting next week, soothed concerns about the economy and offset the impact of what investors describe as a "mixed" corporate earnings season.
S&P 500 futures rose 16.8 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration of the contract. Dow Jones industrial average futures added 152 points, and Nasdaq 100 futures gained 32.75 points.
In a reassuring sign on the economy, the number of Americans filing new claims for jobless benefits fell last week to near a four-year low, a hopeful indication for a labor market that has shown signs of weakness.
Shares in Sprint Nextel Corp
If the move higher by the market is sustained through the trading day it will lift the S&P 500 away from a technically important level around 1,333, which if breached may lead to further losses. The level marks a convergence of several technical factors, including the index's 50-day moving average.
"Finally the markets have forced the ECB and the euro group leaders to begin to make statements that the market really wants to hear," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
"This time he's being more decisive and using more challenging words; yes, he's said before that the euro is irreversible, but today he says it's irreversible and we will make it irreversible," said Cardillo.
With around two-fifths of S&P 500 companies reporting earnings as of Wednesday, 65 percent have beat Wall Street's profit estimates. However, three in five companies missed revenue estimates, with many pointing to a weakening global economy.
Dow Chemical Co
(Editing by Bernadette Baum, Dave Zimmerman)
