By Ellis Mnyandu
NEW YORK (Reuters) - Stocks headed for a sharply higher open on Thursday after several central banks followed the U.S. Federal Reserve in cutting interest rates, buoying hopes the actions will lessen the impact of a global recession.
While the actions should drive down the costs of borrowing, more and more data suggest that a slew of recent efforts to unlock jammed credit markets are slowly freeing up cash needed to lift the economy out of the downturn.
Buyers looked set to wade back into the market in search beaten-down shares, encouraged by news of stronger-than-expected profits at Colgate-Palmolive Co and at Exxon Mobil , up 1.2 percent to $75.50.
Interest-rate sensitive stocks, including banks, rose, with shares of Citigroup up 3.7 percent at $13.39 before the bell.
"Central banks are trying to lower rates low enough to push the money out into the system," said Rick Meckler, president of investment firm LibertyView Capital Management in New York. "It probably will work. It's just that we've reached such a depressed level that this still leaves people nervous."
S&P 500 futures rose 34.40 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 348 points, and Nasdaq 100 futures shot up 38 points.
Thursday's government data helped underscore why the Fed deemed it necessary to cut rates on Wednesday.
Data showed that gross domestic product, which measures the output of all goods and services within U.S. borders, experienced its sharpest contraction in seven years in the third quarter, but the slippage was slightly less than expected.
The Fed cut its benchmark fed funds rate by half a percentage point to 1 percent on Wednesday, action that was soon followed by cuts in Taiwan and Hong Kong.
Japan is expected to cut rates on Friday, while the European Central Bank, Australia and the Bank of England are expected cut rates next week. China also cut on Wednesday.
(Reporting by Ellis Mnyandu, Editing by Kenneth Barry)
