Stocks to climb on China rate cut

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NEW YORK (CNNMoney) -- A surprise rate cut by China's central bank and a successful bond auction by Spain cheered investors around the globe Thursday and had U.S. stocks poised to build on the previous day's rally.

Investors are also looking ahead to Federal Reserve Chairman Ben Bernanke's congressional testimony, and showed little reaction to a jobless claims report that was close to expectations.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were moved sharply higher following the 7 a.m. ET announcement from the People's Bank of China. Stock futures indicate the possible direction of the markets when they open at 9:30 a.m. ET.

China's central bank cut its range of lending and deposit rates by a quarter percentage point in an effort to address the slowdown in the nation's manufacturing sector. Its key 1-year lending rate fell to 6.31%.

While there had been growing hopes for action by the Chinese government to stimulate the economy, the timing of Thursday's announcement was a surprise.

Meanwhile, the Spanish government held a bond auction that was an important test of its ability to raise money from investors, two days after its treasury minister warned the country was at risk of being shut out of financial markets.

Demand was more than three times the €611 million worth of 10-year bonds that Spain offered, up from a bid-to-offer ratio of 2.42 in April. But the interest rate Spain had to pay to sell the debt rose to 6.044% from 5.743% in April.

The yield for Spain's 10-year debt edged slightly lower to 6.16% in trading following the auction.

Spanish bond yields have been rising recently as investors demand an increasingly high risk premium to lend money to the government. Fears are growing that the country will need to be bailed out if it can't come up with a way to re capitalize its banking sector, which some estimates put at a cost of up to €100 billion.

Back in the United States., Bernanke will testify on the economy before the Joint Economic Committee of Congress at 10 a.m. ET. Observers will look for clues as to whether the Fed might extend its Operation Twist program or, in a move that would be even more drastic, launch a third round of asset purchases known as quantitative easing.

Economy: First-time claims for unemployment insurance totaled 377,000 in the week ended June 2, the Labor Department said. That's 2,000 more than the consensus forecast, but was down 12,000 from the prior week.

A new report on consumer credit will be released at 3 p.m. ET. Consumer credit for April is expected to have increased by $12.7 billion.

U.S. stocks rallied Wednesday, with the Dow and S&P 500 logging their best gains of the year, as investors grew hopeful that more stimulus for the global economy is around the corner.

Companies: Yoga clothing retailer Lululemon Athletic (LULU) plunged 10% in premarket trading, after releasing a weak outlook along with its first quarter results.

Food producer J.P. Smucker (SJM, Fortune 500) reported that operating earnings per share rose 10 cents to $1.10, better than the drop of 1 cent per share forecast by analysts.

Shares of Nasdaq OX Group (NDAQ) fell in 1.2% in after-hours trading on Wednesday. The exchange operator announced its plans to spend $40 million to compensate trading firms for losses caused by glitches that delayed Face book's (FB) debut. Later in the day, Nasdaq CEO Bob Reified apologized for the problems but said affected investors should talk to their brokers.

Korean electronics maker Samsung named a new chairman Thursday. The Wall Street Journal reported that the company also intends to launch its new smart phone as planned, despite Apple (AAPL, Fortune 500) seeking an injunction against its sales as part of its patent infringement lawsuit.

Shares of Apple edged 0.8% higher in premarket trading Thursday, while Sam sung shares closed up 5% in trading in South Korea.

World markets: European stocks rallied in afternoon trading. France's CA 40 (CAC40) surged 3.6% following the China rate cut, the DAX (DAX) in Germany rallied 3.7% and Britain's FT SE 100 (UKX) added 1.5%.

Asian markets ended mixed. The Shanghai Composite (SHCOMP) eased 0.7%, but the Hang Eng (HSI) in Hong Kong gained 0.7% and Japan's Nikkei (N225) finished 1.2% higher.

Currencies and commodities: The dollar rose against the yen, but slipped against the euro and British pound.

Oil for July delivery, which had been lower ahead of the China rate cut, was up $1.20 to $86.22 a barrel following the cut.

Gold futures for August delivery fell $12.30 to $1,621.90 an ounce.

Bonds: The benchmark 10-year U.S. Treasury gave up earlier gains after the China announcement, leaving the price little changed and the yield at the 1.65% level reached late Wednesday.