Stocks were set to gain more than 2 percent at the open on Wednesday as a coordinated action by major central banks to provide liquidity to the global financial system boosted investors' appetite for risky assets.
The U.S. Federal Reserve, the European Central Bank as well as the central banks of Canada, Britain, Japan and Switzerland agreed to lower the cost of existing dollar swap lines by 50 basis points starting from December 5.
The actions came as China unexpectedly cut its banks' reserve requirements in hopes of boosting an economy running at its weakest pace since 2009.
S&P 500 futures jumped 33 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 282 points, and Nasdaq 100 futures added 62.25 points.
Global shares jumped after the moves, with the MSCI world equity index <.MIWD00000PUS> gaining 1.5 percent and the FTSEurofirst 300 <.FTEU3> rising 3.1 percent.
All terrific news for short-term traders. You can't fight the Fed, and now that we're in a global economy, you can't fight the global central banks, said Wayne Kaufman, chief market analyst at John Thomas Financial in New York.
The upside is bigger than the downside. There is tremendous stress out there, so doing something in a concerted effort to relieve some of the stress is a good thing.
Further boosting sentiment, the pace of job growth in the private sector accelerated in November, with U.S. employers adding 206,000 jobs, the ADP National Employment Report showed, topping forecasts.
Financial stocks extended gains after the central banks' action. Bank of America Corp
Still, financial shares could be pressured after Standard & Poor's on Tuesday reduced its credit ratings on 15 big banks, mostly in Europe and the United States as part of a sweeping overhaul of its ratings criteria. JPMorgan Chase, Bank of America, Citigroup, Wells Fargo & Co
The pending home sales index, to be released at 10 a.m. EST, is seen rising 1.5 percent for October.
The Dow and S&P 500 advanced for a second day on Tuesday as stronger-than-expected consumer confidence data and hopes for further progress on a solution to Europe's fiscal mess bolstered sentiment.
(Reporting by Angela Moon; editing by Jeffrey Benkoe)