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Futures Point to Weak Start for U.S. Stocks

Mike Taylor

Premarket futures were forecasting a lower open for stocks on Wall Street Wednesday, a day after the market saw an early rally completely erased by a loss of momentum in the afternoon.

Futures for the S&P 500 were down 5.2 points at 1271 and were 6.4 points below fair value. Nasdaq futures were lower by 9 points at 1847 and were 9.2 points under fair value.

On Tuesday, the major indices rose early on a sharp decline in crude oil prices, only to give back those gains and finish in negative territory. Poor performances by energy, mining and technology stocks contributed to the reversal.

Several financial-services names were in the spotlight ahead of the new trading day. Continuing to stoke speculation on a potential deal to help struggling brokerage Lehman Brothers (LEH Quote), the Associated Press said that Korea Development Bank has inked a proposal to buy a 25% stake in Lehman. The news agency cited a report in a widely circulated South Korean newspaper.

Meanwhile, Ospraie Fund, a commodities investment fund that is 20%-owned by Lehman, announced that it will be shutting down because of bad bets on copper and natural gas.

Elsewhere in the financial sector, The Wall Street Journal reported that large Chinese banks are reducing their investments in mortgage debt issued by Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote).

Wachovia (WB Quote) named Tom McManus, former chief investment strategist at Banc of America Securities, as chief investment officer.

Back in merger news, beverage maker Coca-Cola (KO Quote) offered to buy China Huijan Jice for about $2.5 billion.

In earnings, machinery manufacturer Joy Global (JOYG Quote) reported fiscal third-quarter earnings that beat analyst estimates and raised its 2008 forecast. Office-supplies retailer Staples (SPLS Quote) reported that second-quarter earnings dropped 16% year over year.

In the realm of commodities, crude oil was declining $1.30 to $108.41. Gold was down $2.30 at $808.20.

Shifting to economic data, employment consultancy Challenger, Gray & Christmas announced that employers announced job cuts totaling 377,325 for the summer, a 30% increase over spring layoff numbers.

Later, auto manufacturers will be revealing their August sales figures. The Census Bureau will also release data on factory orders for July. The Federal Reserve's so-called beige book, which contains anecdotal data on the state of the economy, will come out in the afternoon.

Longer-dated U.S. Treasury securities were gaining slightly. The 10-year was adding 2/32 to yield 3.73%, and the 30-year was up 4/32, yielding 4.35%. The dollar was gathering strength against the euro and pound but was slightly lower against the yen.

Overseas exchanges were mainly trading lower. The FTSE in London, the Dax in Frankfurt and the Hang Seng in Hong Kong were showing weakness, while the Nikkei in Japan was up slightly.