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The day after stocks rallied despite a CPI report that convinced Wall Street the Fed is certain to hike rates in June, investors will be watching latest Fed comments and economic readings.
June 15, 2006: 8:47 AM EDT


NEW YORK (CNNMoney.com) - Stock futures were pointing to extend a rebound on a day when another round of economic readings and comments from Federal Reserve officials is likely to guide stocks.

Stock futures were up in early trading Thursday, indicating a solidly higher open, after a late-day rally Wednesday ended a three-day losing streak on Wall Street. Futures and bonds slipped a bit after early economic readings came in a bit stronger than expectations.

Peter Cardillo, chief market strategist SW Bach, said he's not sure the rally is a traditional "dead cat bounce," when markets rally greatly because investors become convinced markets have been oversold and go hunting for bargains. But he thinks that the recent fears about higher interest rates have now been fully priced into stocks and have positioned stocks to make some modest gains.

"It may have signaled the end of the decline for the short term," he said about the selling Wednesday morning. "I kind of think that yesterday's rally will probably be extended unless we get some unforeseen real hawkish talk out of Fed speakers."

The Empire State Index rose to 29.0 in June from a 12.9 reading in May. The New York Fed's report on manufacturing activity in its territory is one of the most current readings on economic activity. Economists surveyed by Briefing.com had forecast the index would slip to 11.0.

Weekly initial jobless claims fell to 295,000 the week ending June 10, from a revised 303,000 level the previous week, when economists had expected it to climb to 320,000.

The stronger economic readings could be a bit of a negative for the markets, as a weaker economy could constrain the Fed from hiking rates further after its June 29 meeting.

At 9:15 a.m. ET come reports on capacity utilization and industrial production in May, with economists looking for little change in activity at the nation's factories.

Fed officials set to speak today include Boston Fed President Cathy Minehan, Fed Gov. Randall Kroszner and Fed Chairman Ben Bernanke, who is set to speak on energy issues Thursday afternoon in Chicago.

Comments from Fed officials about the threat of inflation have helped to fuel a sell-off in global equity markets over the last couple of weeks, and the higher than expected inflation reading in the Consumer Price Index report Wednesday convinced economists and investors Wednesday that another Fed rate hike is certain to be announced at its June 29 meeting.

Investors will now start watching for clues as to how high the Fed might raise rates after its June 29 meeting. The Fed's so called beige book said the various banks around the country saw signs of a cooling economy along with rising prices. That indication of slower growth helped lift stocks by raising hopes the Fed might not raise rates after June. That's why Thursday's economic readings could be important.

Oil prices continued their rally that started Wednesday on the weekly report on U.S. fuel inventories report that showed crude inventories smaller than expected.

The July light crude futures contract for NYMEX rose 49 cents to $69.63 in electronic trading, while the July contract for Brent crude gained 33 cents to $67.31.

Major markets closed mostly higher Wednesday in Asia after the Bank of Japan left interest rates there unchanged. Major European markets also were higher in early trading.

Treasury prices were lower again Thursday, lifting the yield on the benchmark 10-year note to 5.10 percent from the 5.06 percent level reached after the post-CPI sell-off in bonds Wednesday. The dollar was little changed against the yen and the euro after being lower earlier in the morning.