U.S. Stock Futures Advance as Fed, Central Banks Add Liquidity to Markets

By Rita Nazareth - Nov 30, 2011 8:21 PM GMT+0700

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Nov. 29 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. Stocks and commodities rose for a second day as U.S. consumer confidence increased by the most since 2003 and European finance ministers discussed efforts to tame the region’s debt crisis. Treasuries pared losses. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)

U.S. stock futures rose, indicating the Standard & Poor’s 500 Index will rally a third day, after the Federal Reserve and five central banks lowered interest rates on dollar swaps and China cut banks’ reserve requirements.

The Financial Select Sector SPDR Fund (XLF) advanced 3.1 percent as Wells Fargo & Co. (WFC) and Citigroup Inc. (C) added at least 2.9 percent. Caterpillar Inc. (CAT) and Freeport-McMoRan Copper & Gold Inc. rallied more than 3.3 percent to pace gains among the biggest companies. AMR Corp. (AMR) increased 31 percent, following yesterday’s plunge spurred by its bankruptcy filing.

S&P 500 futures expiring in December gained 2.6 percent to 1,227.40 at 8:18 a.m. New York time. The benchmark gauge rallied 3.2 percent over the previous two days. Dow Jones Industrial Average futures rose 262 points, or 2.3 percent, to 11,827.

"Central banks around the world are going back to easing or supporting the marketplace," Mark Bronzo, who helps manage $24 billion at Security Global Investors in Irvington, New York, said in a telephone interview. "It’s a step in the right direction especially because it’s coordinated on a global basis. These actions may help global growth not to follow Europe into a recession."

The Federal Reserve and five other central banks agreed to reduce the interest rate on dollar liquidity swap lines by 50 basis points and extend their authorization through Feb. 1, 2013. The Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank are involved in the coordinated action, the Fed said in a statement in Washington.

‘Ease Strains’

“The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” the statement said.

Benchmark gauges rose for a second day yesterday as consumer confidence increased and European finance ministers discussed efforts to tame the debt crisis. Stock-futures slumped after the close of regular trading after S&P cut credit ratings for lenders including Bank of America Corp. (BAC) and Citigroup.

Equity futures rebounded as China reduced the amount of cash that banks must set aside as reserves for the first time since 2008 as Europe’s debt crisis dims the outlook for exports and growth. Easing in the nation that contributes most to global growth may boost confidence as Europe’s crisis worsens.

“China is reversing its policy from the past 18 months and releasing capital that may be used for internal expansion,” said Francisco Salvador, strategist at FGA/MG Valores in Madrid. “While they may be seeing some signs of weakening growth, this is also a relaxation of their policy tightening.”

In the U.S., companies added 206,000 workers to payrolls in November, according to data today from Roseland, New Jersey-based ADP Employer Services. The median forecast of economists surveyed by Bloomberg News called for an advance of 130,000. Projections ranged from gains of 95,000 to 200,000.

To contact the reporters on this story: Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net;

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net