Stock futures rise modestly ahead of GDP report

[July 31, 2009]  NEW YORK (AP) -- Stock futures rose modestly Friday morning, extending the previous day's rally ahead of a key reading on the overall output of the economy during the second quarter.

Asian markets pushed higher on the strength of the U.S. market, while European indexes traded in a narrow range after surging ahead a day earlier on strong earnings.

The U.S. markets restarted a two-week rally on Thursday, pushing all the major indexes to their highest closes since last fall.

While earnings reports drove Thursday's gains, investors will be squarely focused on the quarterly gross domestic product report, which measures all the goods and services produced within the United States. It is considered the best barometer of the economy's health. The GDP report is likely to show the economy continued to shrink in the second quarter, but the pace of that decline slowed.

Analysts expect GDP declined 1.5 percent during the second quarter, compared with a 5.5 percent annualized drop the previous quarter.

Smaller spending cuts by businesses, increased government spending and improving trade probably helped the economy during the second quarter as it tries to rebound. However, consumers continued to cut back on their spending amid continued increases in unemployment and a still struggling housing market.

Consumer spending accounts for more than two-thirds of economic activity in the country.

Ahead of the report and the opening bell, Dow Jones industrial average futures rose 43, or 0.5 percent, to 9,133. Standard & Poor's 500 index futures rose 4.00, or 0.4 percent, at 986.20, while Nasdaq 100 index futures rose 1.25, or 0.1 percent, to 1,608.00.

On Thursday, markets rallied sharply after drifting during the first part of the week. Investors poured back into stocks as a new round of earnings reports gave investors hope that the economy is on the mend.

Earnings reports showed companies are still struggling amid the recession, but the problems aren't as deep as investors were expecting heading into earnings season. The market was also boosted by a surprise drop in the number of people continuing to seek unemployment benefits.

The Dow rose its highest level in nearly nine months with a gain of 84 points and the Nasdaq traded above 2,000 for the first time since October.

Meanwhile, bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.63 percent from 3.61 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.18 percent from 0.17 percent late Thursday.

The dollar mostly fell against other major currencies, while gold prices rose.

Overseas, Japan's Nikkei stock average rose 1.9 percent. In afternoon trading, Britain's FTSE 100 rose 0.03 percent, Germany's DAX index declined 0.1 percent, and France's CAC-40 rose 0.1 percent.

[Associated Press; By STEPHEN BERNARD]

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