Wall Street stocks were set for a higher start on Wednesday as US retail sales grew unexpectedly last month, raising the hope that US consumers would continue to spend in spite of the gloomy outlook for the economy.
Less than an hour before the opening bell, S&P 500 futures were up 11.2 points at 1,361, Nasdaq futures were up 18.8 points at 1,808.8 and futures for the Dow Jones Industrial Average were up 65 points at 12,451.
Retail and food sales increased 0.3 per cent in January versus a consensus forecast of a decline of 0.3 per cent, as strong sales of news cars and gasoline contributed to an unexpected uptick.
Excluding autos, sales still managed a 0.3 per cent increase, but excluding cars and gasoline, retail sales were flat.
Auto sales rose 0.6 per cent, the most since September, while gas stations increased sales by 2 per cent. However, furniture stores, building materials and garden suppliers all registered declines.
The more upbeat retail news will be warmly welcomed by Wall Street analysts who feared that US consumers were beginning to rein in spending as house prices have slumped and the outlook for employment has darkened.
After the Commerce Department data were released, stock futures extended early gains, the dollar rallied and bond yields rose.
In spite of the more positive mood on Wednesday, traders were expecting the near-unprecedented volatility to continue. Standard & Poors said that the S&P 500 had risen or fallen more than 1 per cent on 17 of 28 trading days in 2008. This ranks as the third most volatile start to the year on record after 1932 and 1933.
Such volatility was in evidence on Tuesday when billionaire investor Warren Buffett said he was willing to assume the liability for up to $800bn in municipal bonds currently guaranteed by monoline bond insurers facing possible credit downgrades.
The S&P rallied as much as 1.7 per cent but later cut these gains in half as analysts said the plan would do little to solve bond insurers' real problem - the heavy losses they took selling insurance on structured credit securities which have turned sour.
Wall Street fears that a downgrade could lead to heavy losses for US banks and a possible firesale of credit assets.
In earnings news Coca-Cola (NYSE:KO) said fourth quarter profit jumped a better-than-expected 79 per cent to $1.21bn, helped by a 24 per cent rise in revenues. The drinks company recorded strong overseas growth and the results were aided by a favourable comparison, after taking a big impairment charge last year. The stock gained 1.1 per cent to $60.60 in pre-market activity.
Shares in Applied Materials (NASDAQ:AMAT) jumped 6.2 per cent to $19.20 pre-market trading after analysts were pleased with the chipmaker's quarterly results. Net income declined to $262.4m from $403.5m and revenues fell 8 per cent, hurt by a fall in semiconductor equipment manufacturing.
Deere said fiscal first quarter earnings rose 55 per cent, as soaring global demand for food increased orders for its agricultural equipment. The results were better than analysts had forecast but the shares dropped 1.8 per cent in the pre-market.
European stocks reversed earlier losses after the retail data. The FTSE Eurofirst 300 index rose 0.1 per cent and the FTSE 100 was down only 0.4 peer cent having earlier shed 1.2 per cent. Asian equity markets were mixed with the Hang Seng closing up 1.1 per cent as the Shanghai Composite fell 2.4 per cent
Bond prices gave up ground as risk aversion waned. The yield on the two-year Treasury note was up 2bp at 1.94 per cent while the 10-year Treasury note yield put on 5bp to 3.71 per cent,
Meanwhile, the dollar pared early losses against major currencies. The dollar rose 0.1 per cent against the euro to $1.4571 from $1.4584 before the retail sales figures. Against the pound the US currency was down 0.1 per cent at $1.9613.
Gold was trading down 0.8 per cent at $903.90 and crude oil prices were little changed at $92.70.
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