Stock rebound may have legs

NEW YORK (CNNMoney.com) -- U.S. stocks may continue their rebound Wednesday, although investors will have to weigh new details about the mortgage meltdown and related housing slump.

At 6:42 a.m. ET, Nasdaq and S&P futures were higher, suggesting gains for stocks at the open.

Stocks advanced Tuesday, recovering from a sell-off that sent stocks into a correction earlier in the week. Markets got a boost after Abu Dhabi's investment arm injected $7.5 billion into troubled bank Citigroup (Charts, Fortune 500).

Hopes that there could be more bank deals were helping futures Wednesday.

According to a story in the Wall Street Journal, a prominent investment banker had proposed to Citigroup earlier about a month ago that it consider a merger with No. 2 bank Bank of America (Charts, Fortune 500).

The paper reported the idea was rejected by Citi and that Bank of America denied to the paper authorizing anyone to approach Citi about a possible deal.

But Citigroup, which rose 1.7 percent Tuesday on news of the Abu Dhabi investment, saw shares rise another 3 percent in early Frankfurt trading Wednesday. Bank of America shares edged up 0.8 percent.

Hopes for banking mergers will be balanced by more hard news of credit woes in the sector. Wells Fargo (Charts, Fortune 500) said late Tuesday it would take a $1.4 billion hit in the fourth quarter for loan losses related to home equity loans.

Mortgage finance firm Freddie Mac (Charts, Fortune 500), which last week announced a $2 billion loss that cut its capital reserves close to the minimum required by regulators, slashed its dividend in half and also said it would sell $6 billion of stock to bolster its finances in anticipation of additional losses. While both moves were signaled last week, the size of the stock sale was larger than some estimates of between $2 billion and $5 billion and shares of Freddie lost another 2 percent in after-hours trading.

A batch of economic reports are due Wednesday, include durable orders, existing home sales and the Fed's Beige Book of economic conditions.

Existing home sales already have fallen to the lowest pace on record since the National Association of Realtors started tracking both single family and multi-family home sales in 1999. Economists surveyed by Briefing.com have forecast an eighth straight month of declines in October to an annual rate of 5.0 million from 5.04 million in September.

Oil prices, which plunged more than $3 Tuesday on growing expectations for OPEC to boost production, slipped further in early trading ahead of the weekly report on U.S. fuel inventories. Light, sweet crude for January delivery was off 9 cents to $94.33 a barrel in electronic trading early Wednesday.

There was more indication that holiday sales were off to a strong start, despite a report earlier Tuesday that showed a sharp drop in consumer confidence.

Online retailers saw record one-day sales of $733 million on Cyber Monday, a 21 percent jump from the Internet purchases on the first day back at work after the Thanksgiving weekend a year ago.

And one of the leading online retailers, Amazon.com (Charts, Fortune 500) won a legal victory late Tuesday afternoon when it was revealed that Federal prosecutors have withdrawn a subpoena seeking the identities of thousands of people who bought used books on the Web site, after a Federal judge ruled buyers had a first amendment expectation of privacy about their reading habits.

In other corporate news, Google (Charts, Fortune 500) announced Tuesday it will spend hundreds of millions of dollars developing new solar and wind technologies while investing in green tech startups.

In global trade, most markets in Asia finished the session lower, while European stocks advanced in morning trading.