Fed cut sparks stock futures

NEW YORK (CNNMoney.com) -- U.S. stock futures surged Friday after the Federal Reserve moved to cut the discount rate, even as it kept the benchmark rate unchanged.

Nasdaq and S&P futures, which had been down before the Fed's surprise move early Friday, shot higher, pointing to a rebound in the battered U.S. stocks.

"What' they're clearly saying is there is a temporary financial issue that requires a temporary move," said David Kelly, economic adviser for Putnam Investments. "This will be very positive for markets. It is a sign the Fed is taking concrete action to address the problems."

Treasury prices turned lower after an initial surge, with the yield rising to 4.67 percent from the 4.65 level reached late Thursday.

The move comes as a meltdown in credit markets had caused severe declines in U.S. stocks and the Fed said in its statement had started to threaten economic growth.

After the major U.S. gauges reached a point Thursday that marked a 10 percent decline from their 2007 highs - signaling a market correction - stocks made a dramatic recovery. The Dow and Nasdaq erased most of their losses to end the session only slightly lower, while the S&P managed a narrow gain.

Despite Wall Street's late surge, Asian markets tumbled Friday. Japan's Nikkei index fell 5 percent, posting its worst day since the Sept. 11 attacks, as a rise in the Japanese yen to levels not seen since June 2006 hurt the stocks of major exporters there.

Markets in Europe were mostly higher in early trading, though. While the dollar was lower against the yen it gained on the euro in early trading.

Oil prices rose in early trading as investors watched Hurricane Dean pick up strength as it moved towards the Gulf of Mexico, a course that could hit production at oil platforms and refineries in the region. The price of U.S. light crude gained $1.08 to $72.08 a barrel in electronic trading.

In corporate news, computer maker Dell (Charts, Fortune 500) said late Thursday that it would restate four years of financial results after an internal audit found that top executives sought accounting adjustments to reach quarterly performance goals.

Still the announcement seemed to end a cloud that had been hanging over the tech bellwether, and shares gained 2 percent in after-hours trading.

Dell rival Hewlett-Packard (Charts, Fortune 500), a component of the Dow Jones industrial average, reported a better-than-expected 29 percent jump in earnings and gave stronger-than-forecast guidance after the close of trading Thursday. Its shares gained nearly 1 percent in after-hours trading.

Early Friday morning, Midwest Express (Charts) accepted a raised $17-a-share offer to be purchased by a group led by private equity firm TPG Capital and Northwest Airlines, ending the hostile bid for the company by rival AirTran Holdings.

Shares of organic grocer Wild Oats Markets (Charts) soared more than 18 percent in after-hours trading Thursday after a bid by federal antitrust regulators to temporarily block its purchase by rival Whole Foods Market (Charts, Fortune 500) was rejected by a federal judge. Whole Foods shares also gained 8 percent on the decision.

High-end retailer Nordstrom (Charts, Fortune 500) reported improved earnings late Thursday that edged past forecasts, as it raised its full-year earnings outlook. Still, shares slipped 5 cents in after-hours trading.