Stocks set to bounce back

NEW YORK (CNNMoney.com) -- Stocks are pointing to a slight recovery Wednesday from the past session's selloff, which was sparked by renewed subprime fears.

At 7:50 a.m. ET, futures were higher, with a comparison to fair value pointing to a positive opening for U.S. stocks.

The major gauges all shed more than 1 percent Tuesday after credit rating agencies Standard & Poor's and Moody's downgraded securities backed by subprime mortgages.

The action taken by the ratings firms raised worries that problems in the subprime mortgage sector, which gives home loans to borrowers with poor credit, could further depress the housing sector.

But it also led to a rally in Treasurys in a flight to quality, which took the yield on the 10-year note down to 5.02 percent late Tuesday. Treasury prices were slightly higher again in early trading Wednesday, taking the yield on the 10-year below the 5 percent threshold to 4.99 percent.

John Silvia, chief economist for Wachovia, said he believes the stock futures were benefiting Wednesday from the lower Treasury yields, which are good for corporate earnings going forward, and the uncertainty by investors about the fixed income markets.

"You've got a lot of people who have moved away from credit sector of the bond market into Treasurys," he said. "Now they're deciding what's the next step, and what we're hearing is they're looking at equities."

Silvia said that hopes are also rising among investors for a good earnings season, which gets underway this week, with relatively few major companies issuing warnings to this point.

"I'm hearing some folks say it (second quarter earnings season) is not going to be as difficult as people feared a month ago," he said.

The dollar, which fell to a record low against the euro Tuesday on the subprime worries, hit another record low of $1.3784 early Wednesday before rebounding to be little changed versus the euro in early trading, while the greenback was lower against the yen.

Eyeing the dive on Wall Street, European stocks tumbled at the open Wednesday. Major Asian markets finished the session lower.

Oil prices were lower ahead of the 10:30 a.m. ET weekly report on U.S. fuel inventories. U.S. light crude lost 17 cents to $72.64 a barrel in electronic trading.

In major corporate news, Gerdau AmeriSteel (Charts), the U.S. unit of Brazilian steelmaker Metalurgica Gerdau, agreed to buy rival Chaparral Steel (Charts) in a cash deal worth $4.2 billion. The $86 a share price for Chaparral represents a 14 percent premium over Tuesday's closing price.

Home builder Ryland Group (Charts, Fortune 500) became the latest company in the sector to warn of losses from weakness in demand and prices of new homes and a write down in the value of its land holdings and inventory.

Shares of Ryland lost 1.4 percent in after-hours trading following the warning.

Apparel company Liz Claiborne (Charts, Fortune 500) is expected to announce plans Wednesday to sell 16 of its 36 brands, according to a report in the Wall Street Journal.

Supermarket magnate Ron Burkle and Internet entrepreneur Brad Greenspan met with members of the Dow Jones (Charts) board Tuesday to discuss a partial purchase of the Wall Street Journal publisher, according to a report in the New York Times. The two are trying to provide an alternative to the $5 billion offer for the company from News Corp (Charts, Fortune 500).