Index futures point to higher start for Wall Street

NEW YORK (MarketWatch) -- U.S. stock index futures twisted higher early Thursday after the government said continuing jobless claims fell by 148,000 to 6.68 million last week, with investors also weighing the ramifications of the Obama administration's planned overhaul of the nation's financial regulatory system.

Up and down in near flat trading earlier on, futures moved higher after the data. The September S&P 500 futures contract was up 3.1 points at 908.4, while Nasdaq 100 futures gained 3.2 points to 1,456.8.

Futures on the Dow Jones Industrial Average were up 29 points at 8,446.

U.S. President Barack Obama on Wednesday proposed a revamp of the U.S. financial regulatory system, which would boost the power of the Federal Reserve, making it the supervisor of large, systemically vital financial institutions. The proposal would also grant it the authority to be a lender of last resort to mega-banks in extraordinary circumstances, if it first receives approval from the Treasury Department.

U.S. Treasury Secretary Timothy Geithner is expected to further outline the plan in testimony Thursday morning before the Senate Banking Committee. He's scheduled to testify before the House Financial Services Committee in the afternoon.

"Markets, I think, will respond to the Federal Reserve being the matinee idol role in neon lights, but alarm bells are starting to ring that the implementation of over-zealous regulation could well blunt the recovery of the economy," said David Buik, strategist at BGC Capital Partners, in a research note. "Maybe that is the price that has to be paid to return the banking sector to blooming health."

Meanwhile, market action remains subdued with investors posting relatively muted reaction to macroeconomic developments, noted Joshua Raymond, market strategist at City Index.

Later data includes leading indicators and the Philadelphia Fed's manufacturing index at 10 a.m. Eastern time.

The Conference Board's index of leading economic indicators is expected to show a 1.1% May rise, according to a survey of economists by MarketWatch. The June Philly Fed index is expected to rise to -15.0 after a reading of -22.6 in May.

Taken at face value, a rise in the LEI index would be consistent with a gross domestic product growth turning positive in the near term, said Paul Dales, an economist at Capital Economics.

"However, we find it hard to believe that output is on the cusp of actually increasing at a time when payroll employment is still falling by over 300,000 per month. Our take on the index is that it is only consistent with a further slowing in the rate at which activity is declining," he said, in a research note.

The Philly Fed index will be closely watched to see if it confirms signs of stabilization in the manufacturing sector signaled by other surveys, despite ongoing problems in the auto sector, said John Ryding and Conrad DeQuadros, economists at RDQ Economics.

The major stock indexes turned in a mixed performance on Wednesday, with financial shares under pressure and technology shares on the rise. The Dow Jones Industrial Average fell 7.49 points to close at 8,497.1. The S&P 500 Index lost 1.26 points to end at 910.71, while the Nasdaq Composite Index rose 11.88 points to 1,808.

The World Bank on Thursday raised its 2009 economic growth estimate for China. The institution expects China's gross domestic product to expand by 7.2% in 2009, up from its March projection of 6.5%.

Rating agency Standard & Poor's said Thursday that its AAA long-term rating on the United States is not likely to change in the near term.

"Despite significant weakening in the near-term economic outlook, projected fiscal deficits, and the high fiscal costs of government support of the U.S. financial sector, we still believe that the U.S. government's credit strengths continue to outweigh its weaknesses," said credit analyst Nikola Swann.

S&P said the U.S.'s key credit strengths include its diversified economy with unusually flexible labor, the U.S. dollar's role as the world's most used currency and the country's stable political system.

Asian equity markets posted a mixed finish Thursday. Tokyo's Nikkei index fell 1.4%. Stocks in Europe were under pressure, with the pan-Europe Stoxx 600 falling 0.6%.

Oil futures erased early gains to fall 22 cents to $70.81 a barrel.

The U.S. dollar rose versus the Japanese yen to trade at 95.90 yen, up slightly from 95.66 yen in North American trade late Wednesday.