Signs of hope

Nasdaq and S&P futures were higher about 1-1/2 hours before the open.

European stocks rallied at midday. Pacific stocks were mixed, with Tokyo's Nikkei index down 3%, while an Australian central bank rate cut pushed stocks higher in Sydney and throughout Asia.

Art Hogan, chief market strategist at Jefferies & Co., said the jump in U.S. stock futures was mimicking the rally overseas. He said the rally was fueled by cheap stocks resulting from the recent market plunge.

"I think we get to a point where we have effectively priced in a lot of worst case scenarios," said Hogan. "We get to a point where we oversold the market, and it throws these bounces at us."

Investors are hoping to do better than Monday, when concerns about the ongoing credit crisis caused a selloff around the world. In the United States, the Dow Jones industrial average closed below 10,000 for the first time in nearly 4 years, down nearly 370 points - after being as much as 800 points lower earlier in the day.

Fed move?: Published reports indicated that the government is planning a bold move to loosen credit markets. The Federal Reserve and Treasury Department are said to be considering buying commercial paper, short-term financing that companies use to fund day-to-day operations, from individual companies.

This would, in essence, put the Fed in a position of funding companies in order to keep the economy running. In the current credit crisis, companies are having a difficult time getting funds to operate.

AIG in the spotlight: At 10 a.m. ET, the House Committee on Oversight and Government Reform will hold a hearing on AIG (AIG, Fortune 500), the insurance giant that the government bailed out with an $85 billion credit line. On Oct. 3, AIG said it had already used $61 billion worth of the loan and was selling off parts of its business to help pay it off.

This will be the second of several House hearings to examine what went wrong with the economy. The first, on Monday, grilled Richard Fuld, chief executive of the bankrupt bank Lehman Brothers, over why his company failed.

On Oct. 16, the House will hold a hearing on the regulation of hedge funds. An Oct. 22 session will focus on the breakdown of credit rating agencies, and a hearing on Oct. 23 will scrutinize the role of federal regulators.

Companies: Bank of America (BAC, Fortune 500) on Monday reported a 68% plunge in third-quarter profit, chopped its dividend in half and announced plans to sell off $10 billion worth of stock.

In other company news, the battle over the Wachovia (WB, Fortune 500) takeover took a break, as the prospective buyers Wells Fargo (WFC, Fortune 500) and Citigroup (C, Fortune 500) decided late Monday to halt litigation until Wednesday.

The economy: At 2 p.m. ET, the Federal Open Market Committee will release the minutes from its Sept. 16 meeting, which could provide insight into why the target for the federal funds rate was kept at 2%.

At 3 p.m., the Federal Reserve will release its report on consumer credit for August. A consensus of economists interviewed by Briefing.com project a $5 billion rise in consumer debt, primarily credit cards and auto loans, from a $4.6 billion rise in July.

Currency and oil: The dollar slipped versus the euro and the British pound, but rose against the yen. Oil bounced off an eight-month low to jump $2.96 a barrel to $90.77.