Wall Street set for sharp losses


Wall Street was set for a sharply lower start on Monday, with investors stuck in a bearish mood after last week’s disappointing corporate earnings and worries over the US economy and the credit market.

The Group of Seven nations said at their meeting in Washington this past weekend that global economic growth would slow due to record oil prices and the weaker US housing market.

Last week, stocks and corporate bonds endured their worst run since late July. In turn bond yields fell sharply. In early trade on Monday, the futures market fully priced in a rate cut, up from a 92 per cent chance on Friday that the Federal Reserve would follow up a 50 basis point rate cut in September with a 25bp reduction when it meets at the end of this month.

Both the S&P 500 and Dow Jones Industrial Average are now below the levels they were trading at prior to the Fed’s rate cut on September 18. Bank stocks have been under strong selling pressure. The AMEX broker/dealers index fell 3.7 per cent on Friday and declined every trading day last week.

Less than an hour before the opening bell, S&P 500 futures were down 8.4 points at 1,497.40 and Nasdaq futures were lower by 12 points at 2,137.8. Last week, the Nasdaq Composite fell beneath a key technical level of 2,750. That triggered further selling on Friday.

Futures for the Dow Jones Industrial Average were down 85 points at 13,475.

European stocks were lower ahead of the open on Wall Street. The FTSE Eurofirst 300 index was down 1.5 per cent while the FTSE100 was lower by 1.3 per cent. Asian equity markets fell sharply in overnight trade, with Japan’s Nikkei 225 index lower by 2.2 per cent, while Hong Kong’s Hang Seng index slid 3.7 per cent.


Financial Times
10/22/2007 6:48:42 AM