Futures Surge After ECB Rate Cut, Jobless Claims, then Fall After Draghi Comments

US stock futures are now turning higher this morning after the European Central Bank cut its key interest rate by a quarter percentage to 1% in an effort to boost the economy. Futures extended gains after the 8:30 jobless claims number. The second rate cut in five weeks was a modest one, but signals the intent of European policy makers to help the struggling economy in the face of a mounting debt crisis. Futures have surged only slightly since the decision, which was expected.

The move was as much a psychological reminder for the markets as an actual attempt to boost growth. ECB President Mario Draghi believes the Eurozone economy could be heading for another recession, and wants to make it clear that his office will do everything in its power to make that downturn as mild and short-lived as possible. All eyes now turn to the full ECB statement and press conference from Draghi, specifically looking for hints that the ECB is preparing to buy more government debt. Such a move would drive down dangerously higher borrowing costs in major European economies of Italy (3rd largest) and Spain (4th largest).

Yesterday’s late-day rally came despite another warning from Standard & Poors that a downgrade could be imminent for the European Union and for European banks. A report, which was later denied, that the G20 was planning a $600 billion lending facility for Europe sparked the rally.

On the corporate front, Boeing (BA) is set for a higher open this morning after employees in three states agreed on Thursday to a new four-year contract. Costco (COST) on the other hand, announced that net income rose 2.6% with 10% higher comparable sales and is opening lower due to missed expectations.

Technically, the major indices and many stocks are forming bull flag patterns that suggest higher prices to come. The market has not seen a major pull-in after blasting off last week. The financials have always been key to any sustained rally, and yesterday’s action was promising for the bulls. Goldman Sachs (GS) led the charge, breaking out of its flag ahead of the market.

Tech has been a mixed bag with some divergences emerging, but one name that looks to have taken over some leadership in the sector is Google (GOOG). Although the company was relatively week yesterday, it is flagging in front of 52-week highs, and should blast off if the market continues to be strong.

Although today’s open is promising for the longs in this market, do not get ahead of yourself. This market remains driven by headlines, and technical patters have not always panned out.

By John Darsie

Disclosures: Scott Redler is long LVS, NFLX, SLV, SPY, MGM, SINA, GOOG, JPM, XLF, OIH, POT

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