U.S. Stock Futures Advance on Microsoft, HP, Nike Buyback Plans

By Sarah Jones and Elizabeth Stanton

Sept. 22 (Bloomberg) -- U.S. stock futures gained as Microsoft Corp., Hewlett-Packard Co. and Nike Inc. announced plans to buy back shares, overshadowing the biggest four-day gain in oil prices since 2000.

Microsoft rallied 5 percent, Hewlett-Packard gained 1.6 percent and Nike added almost 3 percent after the three companies said they plan to repurchase a total of as much as $53 billion in stock. Morgan Stanley rallied 15 percent after Mitsubishi UFJ Financial Group Inc., Japan's biggest bank by assets, said it will purchase as much as 20 percent of the securities firm.

Futures indicated the Standard & Poor's 500 Index may gain for a third day after the government's plan to purge banks of toxic assets and crack down on speculators who bet against shares of financial companies sent the benchmark for American equities to its biggest two-day advance since the aftermath of the 1987 crash.

S&P 500 futures expiring in December added 2.6, or 0.2 percent, to 1,248.6 at 9:15 a.m. in New York after falling as much as 1.8 percent. Dow Jones Industrial Average futures rose 16 to 11,375, and Nasdaq-100 Index futures increased 9.75, or 0.6 percent, to 1,749.25.

Europe's Dow Jones Stoxx 600 Index lost 0.1 percent, following its steepest advance on record Sept. 19. The MSCI Asia Pacific Index added 2.5 percent, bringing its two-day rally to 8.2 percent.

For Barclays Global Investors' Russ Koesterich, Treasury Secretary Henry Paulson's move to shift the burden of subprime- mortgage related losses to taxpayers ``put a floor under the equity markets.'' James Swanson, who oversees about $200 billion at MFS Investment Management in Boston, says the S&P 500 may rise 15 percent after the Treasury immunized investors from ``the brunt of the economic cycle.''

Two-Day Rally

The S&P 500 climbed 8.5 percent in the last two days of trading after a rout that began when Lehman Brothers Holdings Inc. filed for bankruptcy, Merrill Lynch & Co. was sold to Bank of America Corp. and the U.S. took control of American International Group Inc.

The Federal Reserve yesterday approved bids by Goldman Sachs Group Inc. and Morgan Stanley to become banks, ending the ascendancy of the securities firms 75 years after Congress separated them from deposit-taking lenders.

More than $500 billion in losses at banks stemming from the first nationwide drop in home prices since the 1930s has pushed the S&P 500 15 percent lower in 2008. U.S. economic growth may slip to 1.7 percent this year and 1.5 percent in 2009, the slowest since the last recession in 2001 and its aftermath in 2002, according to the median of 80 economist forecasts compiled by Bloomberg.

Bailout Widened

The Bush administration widened the scope of its plan to include assets other than mortgage-related securities. The change to potentially allow purchases of instruments such as car loans and credit-card debt may force an increase in the size of the package as the legislation proceeds through Congress.

Morgan Stanley rallied $4.10 to $31.31. Mitsubishi UFJ will buy 10 percent to 20 percent of the securities firm and decide on a price after conducting due diligence, the Japanese bank said in a statement.

Goldman added 3.8 percent to $134.79. The announcement that the two firms will become banks paves the way for Goldman and Morgan Stanley, both of which will now be regulated by the Fed, to build their deposit base, potentially through acquisitions. That will allow them to rely more heavily on deposits from retail customers instead of using borrowed money -- the leverage that led to the undoing of Lehman and Bear Stearns Cos.

To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net.