Stocks point lower amid fears about financials

[July 15, 2008]  NEW YORK (AP) -- U.S. stocks headed for a sharply lower open Tuesday as investors grappled with increasing fears about the financial sector, including the prospect of bank failures.

Wall Street also awaited a batch of economic readings as the dollar fell to a new low against the euro.

Investors also will be awaiting testimony from Federal Reserve Chairman Ben Bernanke, who is to appear before the Senate Banking Committee to testify on the economy. Treasury Secretary Henry Paulson is set to appear as well.

Their comments will come only days after the Fed and the Treasury said they would lend financial support to mortgage giants Fannie Mae and Freddie Mac if necessary. The well-being of the government-chartered companies has drawn Wall Street's attention in recent weeks as the companies together hold or guarantee more than $5 trillion in mortgages -- nearly half the nation's total.

Investors have grown increasingly nervous about banks after a run on IndyMac Bancorp Inc. led to the bank's takeover by the government Friday. IndyMac is the largest regulated thrift to fail. On Monday, shares of regional banks fell sharply on worries that other banks would succumb to bad debt.

Those fears appeared to remain Tuesday. Dow Jones industrial average futures fell 127, or 1.15 percent, to 10,908. Standard & Poor's 500 index futures declined 11.30, or 0.94 percent, to 1,216.90. Nasdaq 100 index futures fell 16.50, or 0.92 percent, to 1,786.00.

Bond prices jumped as investors sought the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.83 percent from 3.86 percent late Monday.

The weaker dollar raised the prospect of further increases in commodity prices.

Light, sweet crude rose $1.11 to $146.29 per barrel in premarket electronic trading on the New York Mercantile Exchange.

With concerns now flaring up about the health of regional banks that could have sizable exposure to now souring mortgage debt, investors will be looking for any bright spots in the economy. The Labor Department's Producer Price Index is due and should help illustrate the effect of rising prices on businesses. A regional manufacturing report is also due from the New York Fed and the Commerce Department is slated to report on retail sales.

Quarterly results are also due Tuesday from Johnson & Johnson and Intel Corp.

Concern about the health of the U.S. economy, the hard-hit financial sector in particular, sent the euro to a new high against the dollar. The currency reached $1.6038 in European trading.

In corporate news, General Motors Corp. is expected to cut several thousand salaried jobs and to lower truck production because of falling U.S. sales, two people briefed on the plan told The Associated Press.

Overseas, Japan's Nikkei stock average fell 1.96 percent. In morning trading, Britain's FTSE 100 fell 1.61 percent, Germany's DAX index fell 2.00 percent, and France's CAC-40 fell 1.43 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com/

Nasdaq Stock Market: http://www.nasdaq.com/

[Associated Press; By TIM PARADIS]

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