Markets open big on stimulus hope

NEW YORK (CNNMoney.com) -- Investors lifted stocks higher at the opening bell Friday, on hopes that a Washington economic stimulus plan would help stave off a recession, along with reassuring earnings guidance from corporate bellwethers.

The Dow Jones Industrial Average added nearly 1 percent, as the S&P 500 and Nasdaq each showed gains in a rebound for Wall Street, which had a disastrous day on Thursday, when the Dow plunged about 2.5 percent on rising recession fears.

President Bush is expected to outline a new plan designed to boost economic growth and avert a recession in a speech Friday after meetings with the White House and congressional leaders.

His speech comes a day after Federal Reserve Chairman Ben Bernanke urged lawmakers to take swift action to spur consumer spending.

The markets were buoyed by tech giant IBM (IBM, Fortune 500), which raised its earnings guidance as it reported the strong results it had pre-announced earlier in the week. Shares were up nearly 4 percent in early trading in Frankfurt.

Early Friday another Dow component, General Electric (GE, Fortune 500), reported earnings that met forecasts as it reaffirmed its 2008 earnings guidance. Shares of GE gained in early pre-market trading following the report.

Art Hogan, chief market analyst at Jefferies & Co., said that markets were cheered in the revenue gains in those two blue chips, particularly in their overseas sales, which have been helped by the weak dollar and stronger economic growth in those economies. He said that part of the gains in futures is a reaction to the 5 to 6 percent decline in major U.S. stock indexes over the course of the last three trading days.

"At some point in time we have to look at this as oversold," said Hogan.

Among tech shares, No. 2 chipmaker AMD (AMD, Fortune 500) saw shares gain 5.5 percent in after-hours trading Thursday after it reported a loss that was smaller than forecast on surging sales of microprocessors.

But there was more bad news from the banking and home lending sector, as Washington Mutual (WM, Fortune 500), the nation's largest thrift, reported a $1.9 billion loss after the bell that was worse than forecast. Shares plunged 9 percent in early Frankfurt trading.

In corporate news, NYSE Euronext (NYX), owner of the New York Stock Exchange, agreed to buy its long-time rival the American Stock Exchange in a $260 million stock deal Thursday.

In global trade, Asian markets finished a volatile session mixed, and European stocks also were mixed in midday trade.

Recession fears could be fanned or calmed by the release of the Leading Economic Indicators from the Conference Board at 10 a.m. ET. Economists are forecasting a narrow 0.1 percent drop, which would mark the third straight decline for the measure designed forecast future economic activity.

A much bigger-than-expected drop could feed recent fears about the economy, while a gain, coupled with the strong earnings guidance, could spur a rally.

Also, just after the market open, the University of Michigan is due to report its initial reading on consumer confidence in January. Economists are forecasting that the index fell to 74.5 from 75.5 in December.

Oil prices gained in early trading after recession fears caused a sell-off Thursday. A barrel of light sweet crude gained 74 cents to $90.87 a barrel in electronic trading.