Fed hopes offer some relief

LONDON (CNNMoney.com) -- U.S. stocks futures were mixed early Thursday as investors hoped the Federal Reserve would step in and take action to help calm market turmoil.

Speculation that the Fed will lower rates before its meeting next week began to gain momentum Wednesday after Merrill Lynch (Charts, Fortune 500) revealed heavy mortgage losses and an economic report showed the housing slump was deepening.

Merrill took a $7.9 billion writedown due to bad mortgage bets. The loss was bigger than the bank had initially projected, raising fears over how Merrill and other Wall Street banks have been marking hard-to-value mortgage securities.

Merrill's massive hit, along with a decline in existing home sales, led investors to focus on what the Fed will do when it meets on Oct. 31 - or even earlier.

Hopes of policy action helped U.S. stocks pare their losses. The Dow Jones industrial average finished the session near breakeven after falling by more than 200 points earlier in the day.

In global trade, the speculation also helped European stocks open higher. In Asia, Hong Kong stocks finished the session higher. But China's benchmark index sank nearly 5 percent on worries that economic growth in China had peaked.

Economic reports slated for release include a reading on new home sales and a reading on durable goods orders.

Among stocks to watch, Bank of America (Charts, Fortune 500) said Wednesday it was restructuring its investment banking unit. Gene Taylor will retire as that division's head and be replaced by Brian Moynihan, the company said. The bank said it was also cutting 3,000 jobs.

Microsoft (Charts, Fortune 500) announced it was making a $240 million investment in social networking site Facebook and also said it was expanding its ad deal with the site.