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NEW YORK (CNN/Money) -
Stocks were primed for a higher open Thursday, with the impact of Wednesday's rally likely to keep sustaining markets in the early going.
A surge in GM shares, upbeat earnings, and new merger activity served to embolden wary investors Wednesday.
Nasdaq and S&P futures pointed to a higher open Thursday, when fair value is taken into account.
The Dow Jones industrial average (up 127.69 to 10,384.64, Charts) rose about 1.2 percent or 130 points, with GM responsible for about 37 points.
The broader Standard & Poor's 500 (up 14.48 to 1,175.65, Charts) index and the Nasdaq composite (up 29.16 to 1,962.23, Charts) also rallied soundly.
Gains were broad based, with 27 out of 30 Dow issues rising; GM climbed more than 18 percent.
Jack Ablin, chief investment officer at Harris Trust, characterized the advance as a relief rally, sparked initially by the Fed announcement, which cooled some of the worries about the impact of rising inflation.
"I think having some of those fears set aside allowed investors to pay attention to the fundamentals today, which are solid," he added, noting the strong earnings. "Adding to that was the Kerkorian announcement."
What could challenge the session's rally going forward are the economic underpinnings, which appear to be rolling over, Ablin said. In the very short term, a strong April payrolls report on Friday could help.
Shares of General Motors (up $5.03 to $32.80, Research) jumped after investor Kirk Kerkorian made an $868 million tender offer for another 5 percent of GM -- a move that could end in shaking up the troubled automaker. The price -- about $31 a share -- was well above GM's closing price of $27.77 Tuesday.
A jump in weekly oil inventories also added support by cooling some worries about supply shortages going forward.
Some investors also found relief in Tuesday's Fed rate hike -- another quarter-point increase -- as the central bank vowed to keep raising its short-term rate target at a "measured" pace.
While the day's advance was positive, it was likely more of a bounce than something more substantial, said David Briggs, head of equity trading at Federated Investors.
"I don't think we are going to fall apart from here, but I don't think we're going to rally either," he added. "You'll probably see more churning, with a slight bias to the upside."
After the close, IBM (up $0.61 to $77.08, Research) announced that it would cut 13,000 jobs -- mostly in Europe -- as part of an international cost-cutting plan that will result in a pre-tax charge of between $1.3 billion and $1.7 billion.
Thursday brings earnings from Blockbuster (Research), Gillette (Research) and a few other companies, while economic reports are due on weekly jobless claims and first-quarter productivity.
Oil inventories up
The weekly oil inventory report showed a much larger than expected rise in crude inventories and gasoline inventories.
Briggs noted that the surprisingly strong inventory numbers made people feel better as well, even though crude prices rebounded after falling just after the report.
Oil fell briefly below $49 a barrel after the report but recovered as the morning wore on. U.S. light crude oil for June delivery rose 63 cents to settle at $50.13 a barrel on the New York Mercantile Exchange.
At the same time, all was not as rosy in the Treasury market.
Treasury prices slumped on reports that the Treasury was considering reissuing the 30-year bond. The report pressured the 30-year, sending its yield higher. The 10-year note fell about 8/32, raising its yield to 4.19 percent from 4.16 percent late Tuesday. Bond prices and yields move in opposite directions.
In currency trading, the dollar fell versus the euro and the yen.
On the move
Ford Motor (up $0.69 to $10.16, Research) and DaimlerChrysler (up $1.65 to $40.95, Research) both gained alongside GM.
Among other stock movers, Cigna (up $2.32 to $96.77, Research) rose after reporting higher-than-expected quarterly earnings and boosting its fiscal-year 2005 forecast.
MetLife (up $4.71 to $43.55, Research) also reported higher-than-expected quarterly earnings and issued a fiscal 2005 earnings forecast that is above forecasts, sending its shares higher.
A number of financial stocks rallied, sending the Amex Securities Broker/Dealer (Charts) index up 3.7 percent.
Web conglomerate IAC/InterActiveCorp (up $1.16 to $23.22, Research) rose 5.3 percent after reporting earnings rose from a year ago and topped estimates.
In addition, a couple of big mergers were announced, adding to the session's upbeat tone. Germany's Fresenius Medical Care said it will buy American dialysis company Renal Care (up $6.40 to $45.70, Research) for $3.5 billion in cash. That sent shares of Renal Care up 16.3 percent in active New York Stock Exchange trade.
Additionally, American Tower (down $0.01 to $17.20, Research) said it will buy Spectrasite (up $5.00 to $61.20, Research) in a deal worth about $3.1 billion. Both companies are in the wireless broadcast tower industry.
Renovis soared after European drugmaker AstraZeneca (up $0.44 to $45.06, Research) said it would move on to final stage clinical trials of the experimental stroke treatment it licensed from the American biotech, despite mixed results in earlier studies.
That sent shares of Renovis (up $6.38 to $13.17, Research) 94 percent higher in unusually active Nasdaq trade.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than three to one on volume of 1.79 billion shares. On the Nasdaq, advancers topped decliners two to one on volume of 1.91 billion shares.
Stocks and bonds seesawed Tuesday but mounted a small rally in the last minutes of the session after the Fed corrected its policy statement, adding a line that long-term inflation expectations were "well-contained" -- a calming message for stock investors. The central bank said the sentence had been dropped inadvertently.
Investors seemed to shrug off the Institute for Supply Management's services index, which fell to 61.7 in April from 63.1. Economists surveyed by Briefing.com thought it would fall to 61.
COMEX gold rallied $2.30 to settle at $430 an ounce, bouncing with other dollar-traded commodities.
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