Futures look to extend rally after IBM outlook

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

* Corporate earnings continue to be a focus, and investors were cheered after IBM (IBM.NY) late Wednesday raised its full-year profit forecast.

* IBM's outlook bucked a recent trend of tech companies including Intel Corp reducing their outlooks, which many analysts said had negative broader implications because the sector is considered a proxy for business spending.

* Dow component International Business Machines Corp reported revenue that was below consensus, 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.

* Travelers Cos Inc , another Dow component, early on Thursday reported its profit was below expectations as the insurer's catastrophe losses fell from a year before but were still higher than historical norms.

* Morgan Stanley swung to a profit in the second quarter, though revenue declined due to a slowdown in trading and dealmaking volumes.

* Investors have been concerned that the debt crisis in Europe and signs of slowing growth elsewhere around the world would hit profits this quarter, but thus far most companies have topped lowered expectations. With 10 percent of the S&P 500 having reported, according to the latest Thomson Reuters data, 73 percent have beaten expectations.

* 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 feared. U.S.-listed shares of the company climbed 10 percent to $1.91 before the bell.

* S&P 500 futures rose 5.6 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 70 points and Nasdaq 100 futures rose 18 points.

* With the gain 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 are also looking to a round of economic data, 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 a.m. 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.

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

(Editing by Chizu Nomiyama)