Stocks set to rebound from huge drop

NEW YORK - Wall Street headed for a sharply higher open Friday as a strong outlook from IBM encouraged investors to buy back into stocks after their huge drop this week.

The market remains extremely skittish, however. The Dow Jones industrial average, having suffered its worst three-day plunge in over five years, is now at levels not seen since last March. Though some companies are weathering the economic slowdown well — like International Business Machines Corp., which told Wall Street late Thursday to raise its 2008 profit estimates for the tech company — others are struggling.

Washington Mutual Inc. reported a steep loss late Thursday for the fourth quarter, just as Citigroup Inc. and Merrill Lynch did earlier in the week. With the banking industry trying to fix its shrinking portfolios and preparing for more distress in consumer debt, the economy has only the government to fall back on.

Federal Reserve monetary policymakers meet Jan. 29-30, and the market widely expects them to lower the key interest rate, perhaps by a half-point.

And at 11:50 a.m. EST, President Bush is expected to speak on the economy and discuss a plan to stimulate the economy through tax rebates and other strategies.

Investors also awaited consumer sentiment data from the University of Michigan, which is expected to indicate a decline as worries escalate about a possible recession. Though not a perfect predictor of consumer spending, the report is closely watched; consumer spending accounts for about two-thirds of the nation's economy.

Dow Jones industrial average futures rose 114, or 0.93 percent, to 12,330.

Standard & Poor's 500 index futures gained 14.40, or 1.07 percent, to 1,354.10, while the Nasdaq 100 index futures advanced 18.50, or 1.00 percent, to 1,874.

The dollar rose against most major currencies, while gold fell.

Crude oil futures dipped 3 cents to $90.10 a barrel in pre-market trading on the New York Mercantile Exchange.

In overseas trade, Japan's Nikkei stock index closed 2.07 percent higher and Hong Kong's Hang Seng index rose 0.35 percent. In Europe, London's FTSE 100 rose 1.31 percent, Frankfurt's DAX slipped 0.05 percent and Paris' CAC advanced 0.28 percent.