Futures point to higher start as Lehman gains

1/04/2008 - 14:12

By Jennifer Coogan

NEW YORK (Reuters) - Stocks were poised to start the second quarter higher on Tuesday as strong demand for a share offering by Lehman Brothers Holdings Inc helped restore confidence in financial company stocks.

Lehman, which has been dogged by rumors that it lacked adequate capital, announced on Monday it would raise as much as $3 billion by issuing convertible preferred stock to bolster its balance sheet. A source familiar with the matter said investors had placed orders for more than $10 billion of securities in the sale, indicating that deal was at least 3-to-1 oversubscribed.

"The Fed has put a tourniquet on the potential for calamity in dealing with Bear Stearns," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey, referring to the near collapse and rescue of Bear Stearns.

"The dominant sense in the market was that if there was one more to come, it was going to be Lehman, but Lehman now has the vote of confidence of the Street."

Shares of Lehman jumped 5.4 percent to $39.70 before the opening bell.

Investors also will focus on data at 10 a.m. EDT which could show a further contraction in the U.S. manufacturing sector last month.

S&P 500 futures were up 13.8 points, above fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures rose 113 points, and Nasdaq 100 futures gained 21.5 points.

Economists polled by Reuters expect the Institute for Supply Management's March manufacturing index to slip to 47.5 from 48.3 in February. Any reading below 50 indicates a contraction in activity.

Dell Inc said late on Monday it would close its Austin, Texas, desktop computer plant employing 900 workers as part of a plan to cut expenses by $3 billion. Shares of Dell were up 1.6 percent to $20.24 in pre-market trading.

On Monday, the Dow Jones industrial average <.DJI> was up 46.49 points, or 0.38 percent, at 12,262.89. The Standard & Poor's 500 Index <.SPX> was up 7.48 points, or 0.57 percent, at 1,322.70. The Nasdaq Composite Index <.IXIC> was up 17.92 points, or 0.79 percent, at 2,279.10.

(Editing by Kenneth Barry)

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