Wall St to drop at open on renewed European fears

By @ibtimes on

Stocks were poised to fall sharply at the open on Tuesday on fears the euro zone's sovereign debt crisis was worsening and the U.S. economy was slipping back into a recession.

European shares fell in a choppy Tuesday session, reversing earlier gains, with banks exposed to the euro zone peripheral among the worst performers as political discord around the handling of the regional debt crisis grew.

The region's stocks tumbled 4 percent on Monday, with financial issues falling to their lowest in more than two years. U.S. markets were closed for the Labor Day holiday on Monday.

Swiss shares bucked the trend, boosted after Switzerland's central bank intervened to drive down the value of the franc, buoying exporter shares such as Transocean Ltd.

Asian equities fell on fears Europe could trigger a second full-blown banking crisis.

Europe's problems are our problems. We have concerns about the slowdown in the emerging markets, specific to Asia. We have a euro zone that is an apoplectic frenzy of just trying to right the ship, said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

If you can find some stabilizing influence in the euro zone to give the global markets some confidence, I'd be shocked.

S&P 500 futures lost 28.7 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures fell 243 points, and Nasdaq 100 futures dropped 41 points.

Investors awaited the Institute for Supply Management's August non-manufacturing index at 10:00 a.m. EDT for insight into the pace of economic recovery. Wall Street expectations are for a reading of 51 versus the 52.7 in the prior month. Data on Friday showed zero net U.S. employment growth and stoked recession concerns.

On Monday, data from the euro zone, Britain, China and India suggested growth in global service sector activity was slowing.

President Barack Obama will unveil a major jobs program in a speech to Congress on Thursday. He previewed his proposals for new infrastructure spending and an extension of payroll tax cuts on Monday.

There is a buildup to the President's jobs speech which the market knows will lead to more questions that answers. There is a real lack of clarity politically in terms of what actually can get accomplished with anything he proposes, said Kenny.

Big U.S. banks, in talks with state officials on settling claims of improper mortgage practices, have been offered a deal that could limit legal liability in return for a multibillion-dollar payment, the Financial Times reported.

Bank of America Corp lost 4.6 percent to $6.92 and JPMorgan Chase & Co fell 3.6 percent to $33.37 in premarket trade.

Walgreen Co shed 1.5 percent to $34.24 in premarket after posting August sales.

(Reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)

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