Wall Street stocks were set to open slightly higher on Thursday as positive labor market and same-store sales data brightened the outlook for consumer spending, a pillar of the U.S. economy.
The S&P 500 closed Wednesday above a key technical level and its ability to hold above 1,333.58 will be tested. The level is double the cycle low hit in March 2009 and is near a recent 2-1/2 year high of about 1,344, which could become yet another technical hurdle.
New applications for unemployment benefits fell slightly more than expected in the latest week, according to a government report that pointed to firming labor market conditions.
We're seeing a positive trend, though there's a question of sustainability, said Michael Farr, president of Farr, Miller & Washington in Washington, D.C. For now this is kind of a gift horse and we shouldn't look it in the mouth.
Consumer shares will stay in focus as initial sales reports show March was not as bad as expected for U.S. retailers, suggesting that shoppers largely ignored higher gasoline prices and other concerns.
Among the companies with sales numbers out, Costco Wholesale Corp beat expectations and its shares gained 2.2 percent in premarket trade. Macy's Inc rose 2.3 percent before the bell, while Gap Inc fell 2.9 percent.
Consumer spending is closely watched as it accounts for roughly two-thirds of economic activity in the United States.
Sales for the majority of retailers look better, said Michael James, senior trader at Wedbush Morgan in Los Angeles. I would expect the positive direction in retail to continue.
S&P 500 futures rose 2.9 points and were slightly above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration of the contract. Dow Jones industrial average futures gained 20 points and Nasdaq 100 futures added 4.5 points.
Average weekly volume has so far been the lowest of the year, raising questions about stocks' recent rebound.
Light volume is a little concerning. I'd like to see a little more conviction in buyers, said Kim Caughey Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. But if anything, it also shows a lack of people's willingness to sell.
The European Central Bank announced it was raising its main refinancing rate by 25 basis points to 1.25 percent, as expected.
Banks led European shares to their highest in a month as strategists said a bailout for Portugal would give stability to the market and interest rate rises would not derail equities' advance. <.EU>
(Reporting by Rodrigo Campos; additional reporting by Ryan Vlastelica; Editing by Kenneth Barry)