US STOCKS-Wall St headed higher before Bush, Bernanke 31 Aug 2007 21:01

(Updates with reaction to inflation data, updates prices)

By Ellis Mnyandu

NEW YORK, Aug 31 (Reuters) - U.S. stocks headed for a higher open on Friday as investors drew support from news that President Bush would unveil a plan to help subprime mortgage borrowers and loosen credit conditions that have rattled financial markets for six weeks.

Anticipation that Federal Reserve Chairman Ben Bernanke may signal an interest rate cut is coming soon in a speech on Friday also fueled a rally in stock index futures.

A government report on July personal income and spending showing moderation in one of the Fed's favored consumer price inflation gauges also lent support.

Shares of companies that have suffered most in the credit scare, such as banks, brokers and mortgage lenders, rose before the opening bell.

Goldman Sachs <GS.N> jumped 2.1 percent to $175, while Countrywide Financial Corp. <CFC.N>, the biggest U.S. mortgage lender, gained more than 6 percent to $20.91. The S&P electronic-traded fund for financials <XLF.A> rose more than 2 percent to $34.10 before the bell.

S&P 500 futures <SPc1> rose 17.30 points, above fair value, a formula to evaluate pricing taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures <DJc1> jumped 116 points, and Nasdaq 100 <NDc1> futures climbed 19.50 points.

Bush will discuss the need for legislation to give the Federal Housing Administration the flexibility to help subprime mortgage borrowers who can't make their payments, two administration officials told Reuters. For details, see [ID:nN30203198]. Bush was scheduled to speak at 11:10 a.m. (1510 GMT) in the White House Rose Garden.

"The news on Bush is a positive but it is really the Fed that the focus is on right now," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

Before Bush, markets will focus on the speech by Bernanke for signs about when the Fed may cut interest rates as concern mounts that credit market problems could trigger a recession. The Fed chief is scheduled to speak at 10 a.m. (1400 GMT) at a central bankers' meeting in Jackson Hole, Wyoming.

The White House focus on helping struggling subprime borrowers could also benefit shares of home builders.

Other economic indicators on Friday include the August reading of business activity in the U.S. Midwest from the National Association of Purchasing Management-Chicago, data on U.S. factory orders for July and a final August reading of consumer sentiment from the University of Michigan.

Technology shares, the market's only bright spot on Thursday, will again be in focus, a day after computer maker Dell Inc <DELL.O> posted a stronger-than-expected quarterly profit. [ID:nN30462231]

Energy shares could also gain, with U.S. crude for October delivery up 1.3 percent, at $74.33 a barrel. ((Reporting by Ellis Mnyandu

Editing by Kenneth Barry

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