Wall Street set for higher open as jobless claims ease

NEW YORK (Reuters) - Wall Street was set for a higher open on Thursday as data on the labor market came in roughly in line with expectations, lifting optimism about the state of the anemic economy.

But more companies warned of a continuing difficult environment, including Ingersoll Rand Co Ltd , which lowered its fourth-quarter and full-year 2008 revenue and earnings estimates, citing weakness in Europe. Shares of the diversified manufacturer were down 1.5 percent at $16.10 in premarket trade.

In the auto sector, General Motors and Chrysler LLC have reopened merger talks, the Wall Street Journal reported, citing people familiar with the discussions.

The number of U.S. workers filing new claims for jobless benefits fell last week, Labor Department data showed, but despite the decline, claims remain exceptionally high and are more than 200,000 higher than a year ago.

"On the earnings front, we seem to have a market that has assumed the worst-case scenario has been priced in," said Arthur Hogan, chief market analyst, Jefferies & Co in Boston.

"On the economic data front, that seems to be having a much more intuitive effect on the marketplace, meaning negative news pushes the market in a negative direction, so we'll have to see how things unfold today."

S&P 500 futures rose 7.30 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 76 points, and Nasdaq 100 futures added 5.25 points.

The Journal report said Chrysler owner Cerberus Capital Management LP has signaled its willingness to cede part of its ownership in the automaker. GM and Chrysler have been lobbying Washington for a financial lifeline to help them weather slumping demand and tight consumer credit.

FedEx rose 2.3 percent to $65.45 in premarket trade after the package delivery company posted a higher quarterly profit but gave a gloomy picture of the economy next year. FedEx said it was taking action to cut costs.

Other companies expected to report results are world No. 3 software maker Oracle and Carnival Corp .

After the close on Wednesday, video game publisher Take-Two Interactive Software reported a quarterly loss and issued a 2009 forecast that fell short of expectations.

As well as Ingersoll Rand, Pentair cut its fourth-quarter earnings expectations and said it would cut over 10 percent of its workforce and close facilities to cut costs.

In the financial sector, Dick Bove, a widely followed bank analyst with Ladenburg Thalmann, widened his fourth-quarter loss estimate for Citigroup , saying the bank may take significant writedowns in its capital markets operations, similar to those seen from Goldman Sachs Group Inc and Morgan Stanley this week.

On Wednesday, Bove raised his price target and profit view on Morgan Stanley, helping the stock reverse a loss and end higher.

The latest data showed more signs of recession around the world as German corporate sentiment deteriorated sharply in December, while British mortgage lending tumbled 51 percent year-on-year.

On Tuesday, the Federal Reserve -- the U.S. central bank -- cut its benchmark interest rate target to near zero and pledged further action to stave off the year-long recession.

On Wednesday, stocks fell as the government's effort to pull the U.S. economy out of recession raised worries about mounting public debt and blunted optimism raised by the Fed's move.

(Editing by James Dalgleish)

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