Futures set to extend earnings-fueled rally

NEW YORK (Reuters) - Stock index futures rose on Thursday, indicating the market would rally for a third day, following gains on Wednesday that took the S&P 500 to its highest level since May.

Corporate earnings continue to be a focus, and investors were cheered by IBM 's move to raise its full-year profit forecast late on Wednesday.

That bucked a recent trend of tech companies - such as Intel Corp and Qualcomm Inc - lowering their outlooks, which analysts feared could have negative broader implications as the sector is considered a proxy for business spending.

Dow component International Business Machines reported revenue that was below consensus estimates, but its finance chief said he was "pretty confident going into the next quarter." The stock rose 2.6 percent to $193.18 in premarket trading.

"What IBM did, and what other companies are indicating, is that earnings will not be as poor as people felt was possible," said Rick Meckler, who helps oversee $2 billion as president of LibertyView Capital Management in New York.

"When you see earnings hold up in a weakening economy, that allows stocks to keep their momentum and suggests these companies could really advance when the economy picks up."

S&P 500 futures rose 6.2 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 added 58 points and Nasdaq 100 futures rose 13.75 points.

With the advance in futures, the S&P is on track to notch a third straight day of gains. It has risen 1.4 percent over the past two sessions.

Investors have been concerned that the debt crisis in Europe and signs of slowing growth worldwide would hurt corporate profits, but thus far, most companies have beaten the recently moderated expectations of analysts. With 10 percent of the S&P 500 having reported, according to the latest Thomson Reuters data, 73 percent have exceeded expectations.

Morgan Stanley fell 4.7 percent to $13.33 before the bell as quarterly revenue declined due to a slowdown in trading and dealmaking volumes.

A pair of Dow components also reported. Travelers Cos Inc posted a profit that missed expectations while Verizon Communications Inc's revenue rose on strong subscriber additions, though the revenue was slightly below consensus estimates and shares fell 1.3 percent to $45.30.

Investors will be looking to a round of economic data on Thursday, starting with weekly jobless claims at 8:30 a.m. (1230 GMT) Claims are seen rising by 15,000 to 365,000 in the latest week, a sign that the labor market continues to struggle.

Existing home sales and the Philadelphia Fed business activity survey are also on tap for release at 10:00 a.m. (1400 GMT) Home sales are seen rising 1.1 percent, while the Philadelphia Fed survey's main index is expected to improve to minus 8.0 for July from minus 16.6 the month before.

Weak economic data recently has amplified hopes the Federal Reserve would step in with measures to boost growth. On Wednesday, Fed Chairman Ben Bernanke repeated in congressional testimony the Fed's pledge to act if the economy needed it. Later in the day, the Fed's anecdotal Beige Book survey showed the economy is still struggling.

Nokia Corp also reported results, coming in with a loss that was narrower than expected and with the company ending the quarter with more cash than investors had expected. U.S.-listed shares of the company climbed 10 percent to $1.91 before the bell.

Wall Street rose on Wednesday, lifted by results from such bellwethers as Honeywell Inc , though shares of Bank of America Corp were sold off following results, which pressured financials.

(Editing by Bernadette Baum)