NEW YORK – Stock index futures rose on Tuesday as the Dow stood within reach of a record closing high and investors were cheered by China’s record spending plans.
Outgoing Premier Wen Jiabao announced the spending aimed at sustaining growth in the country, while China’s new rulers will focus on consumer-led growth to narrow the gap between rich and poor.
Investors have been looking for China, the second-largest economy in the world, to help buoy global growth at a time when the recovery is sluggish and the euro zone is in a downturn.
Still, China gave a growth target of 7.5 percent for 2013, below 2012’s 7.8 percent.
“One of the concerns of this market has been where the growth could come from,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.
“The sequester here in the U.S. has put a bit of a damper on spending, particularly as it relates to government spending in the coming year and I think there’s at least a feeling that perhaps themoves in China can provide an offset to a slowdown in the U.S.”
Tensions over the fiscal crisis eased as President Barack Obama called more opposition lawmakers to find a way to stop the $85 billion in spending cuts known as the sequester, while congressional Republicans announced a plan to prevent a government shutdown.
The Dow on Monday closed within 40 points of its all-time closing high. Stocks have rallied since the start of the year as investors continue to view equities as more attractively valued than other asset classes.
Loose monetary policy around the world has also driven risk assets. Federal Reserve vice chair Janet Yellen on Monday backed the current aggressive monetary stimulus.
S&P 500 futures rose 3.9 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 31 points, and Nasdaq 100 futures added 10.75 points.
Qualcomm (QCOM) rose 2.4 percent to $68.25 after the company announced a dividend increase and stock buyback program.
Shares of J.C. Penney (JCP) tumbled 3.8 percent to $16.10 in premarket trading after a source familiar with the matter said Vornado Realty Trust (VNO) is selling nearly half its stake in the retailer.
A report on the vast U.S. services sector is expected to show the pace of growth was relatively unchanged in February, with economists looking for the Institute for Supply Management’s non-manufacturing PMI index to dip to 55.0 from 55.2 in January. The report is due at 10:00 am (1500 GMT).