By Leah Schnurr
NEW YORK (Reuters) - Stock index futures pointed to a mixed open on Wednesday, which will bring to a close one of Wall Street's worst years, but not before what is expected to be more bleak data on the labor market.
The Federal Reserve on Tuesday pushed forward with its effort to drive down mortgage costs, setting a target of buying $500 billion in mortgage-backed securities by mid-2009.
The move could bolster optimism as investors have been heartened by signs that the Fed that it is fighting aggressively to stave off the recession, including dropping interest rates to near zero.
"Things haven't improved but at least the Fed has stopped things from appreciably worsening," said Barry Ritholtz, chief market strategist at Fusion IQ in New York.
"Clearly most investors this year were not prepared for what happened and I think there's a sigh of relief from those that were blindsided that the year is finally over."
S&P 500 futures rose 3.10 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 climbed 12 points, while Nasdaq 100 futures were off 0.50 points.
The broad S&P 500 looks set to end 2008 down about 40 percent for the year, though it has recovered almost 18 percent since hitting an 11-year low on November 20.
Markets around the world have been pummeled as the collapse of the U.S. housing market evolved into a global credit crunch and economic slowdown infecting all sectors from financials to automakers to retailers.
Among the U.S. casualties include the bankruptcy, acquisition or government takeover of such household names as Bear Stearns, American International Group
AIG, which was rescued by the government soon after the collapse of Lehman, is prepared to ask the Federal Reserve to relax rules on its more than $60 billion disposals program to allow bidders to use a greater proportion of shares to pay for its assets, the Financial Times reported.
On the housing front, demand for U.S. mortgage applications was unchanged during the Christmas holiday week, holding the highest levels in more than five years with loan rates near record lows, an industry group said on Wednesday.
Bernard Madoff, alleged to have run a decades-long $50 billion Ponzi scheme, faces a Wednesday deadline to tell regulators how much he is worth and where his money and other assets are.
The Madoff scandal, which came to light earlier this month, has added to already negative sentiment in the markets. Scores of wealthy people, banks, universities and charities around the world say they are victims, but so far the exact amount of money is not known in what could be the largest fraud in Wall Street history.
On the economic front, weekly initial jobless claims are expected later in the morning, a day early due to the New Year's holiday on Thursday.
On Tuesday, stocks climbed after the government expanded its bailout of the auto industry, encouraging hopes policy-makers will continue to take steps to minimize the severity of the year-long recession.
(Editing by Tom Hals)