Stocks set to extend gains

NEW YORK (CNNMoney.com) -- U.S. stocks were poised to extend their rally Thursday as investors were cheered by a plan to offer aid for troubled homeowners and a continued slide in oil prices, while awaiting sales reports from major retailers about the start of the holiday shopping season.

At 7:42 a.m. ET, Nasdaq and S&P futures were higher, pointing to a positive start for stocks.

President Bush is set to unveil a plan Thursday afternoon freeze rates on some subprime mortgages - a move that could ease worries about the mortgage crisis that some are worried could crimp consumer spending and even bring about a recession.

But that rescue plan will come after the Mortgage Bankers Association gives a report on mortgage delinquency and defaults for the third quarter. That report is due at 10 a.m., and it is likely to report problems with mortgages at record levels, given it was already reporting record highs heading in the the period that saw a meltdown in credit markets.

Stocks rallied Wednesday, lifted by strong economic readings on productivity growth and private sector employment, along with lower oil prices. Oil prices continued their recent slide to a six-week low Thursday, with the price of a barrel of light sweet crude falling $1.34 to $86.15.

Wednesday's economic reports soothed worries about a U.S. recession ahead of the government's eagerly anticipated report on the labor sector, due out on Friday. But the strong productivity gains were seen as keeping the door open for the Federal Reserve to cut rates by up to a half of a percentage point at its Dec. 11 meeting if it determines continued problems in credit markets necessitated such a move.

The Fed wouldn't be the only central bank cutting rates if it does so. On Thursday the Bank of England cut rates by a quarter percentage point to 5.5 percent. The European Central Bank left its rates unchanged.

The Wall Street Journal reported that Citigroup (Charts, Fortune 500), Bank of America (Charts, Fortune 500) and JP Morgan Chase (Charts, Fortune 500), the nation's three largest banks that are working together to assemble a so-called "super fund" aimed at helping to ease the global credit crunch, are scaling back its size to only half of the planned $100 billion due to a lack of interest from financial firms that are supposed to benefit from the plan.

One measure of the economy's strength comes Thursday from major retailers, who are due to report sales for November.

Sales tracker Thomson First Call is forecasting that sales at stores open at least a year, a key measure of retail strength known as same-store sales, were up 3.3 percent, which would be better than the 2.5 percent gain reported in the year-earlier period. But this year's period is helped by an earlier Thanksgiving.

Wholesale club Costco (Charts, Fortune 500) got the reports off to a good start reporting a 9 percent jump in same store store sales, topping forecasts of a 6.6 percent gain. But those sales were helped by a 21 percent gain at its international stores, as U.S. stores posted a more modest 6 percent increase.

Most of the other smaller retailers to report early Thursday were falling short of First Call's forecasts. Apparel retailer Limited Brands (Charts, Fortune 500) posted a 7 percent drop in same-store sales, worse than the forecast of a 5 percent decline.

Wal-Mart Stores (Charts, Fortune 500), the world's No. 1 retailer, reported U.S. same store sales up 1.5 percent, at the higher end of expectations.

The continued weakness in housing was shown when luxury homebuilder Toll Brothers (Charts, Fortune 500) said it swung to a loss in the fourth quarter due to a $200 million writedown in the value of its holdings. That caused it report a net loss of $81.8 million, or 52 cents a share, its first in 21 years as a public company but less than the forecasts. The nation's No. 7 builder by revenue said the risk of further writedowns and continued weakness in sales and prices did not allow it to give guidance for the current fiscal year.

In global trade, major markets in Asia ended the session higher. European stocks rose in morning trading. Franco-Dutch airline Air France-KLM said Thursday it has offered to buy struggling Italian airline Alitalia.