NEW YORK (Reuters) - Stock index futures sank on Tuesday as fear of a recession gripped investors, suggesting Wall Street will join a global equities plunge that could usher in a bear market.And from this morning's Washington Post:
Weaker-than-expected earnings from Bank of America and Wachovia Corp, the second- and fourth-largest U.S. banks, respectively, added to the grim mood on Wall Street. Shares of Bank of America fell 5.3 percent, and Wachovia slid 3.4 percent in trading before the opening bell.
The sell-off in futures follows sharp losses in global equities on worries a deteriorating U.S. economy would drag other regions down with it.
European stocks posted their biggest percentage drop since the September 11, 2001 attacks on Monday when U.S. financial markets were closed for the Martin Luther King Jr. Day holiday.
Last week, the Bush Administration unveiled its proposed fiscal stimulus package. The announcement was designed to instill confidence in the economy, but investors responded by sending shares down to their worst weekly performance since mid-2002.
"People are really scared about the depth and the potential side effects of this recession from the U.S. The data is really bad," [Stephen Green, senior economist with Standard Chartered Bank] said.The markets fell as fears spread that massive losses on loans made to U.S. home buyers would cascade through the world financial system. Some of the firms that play important, but usually invisible, roles in the global financial architecture are turning out to be exposed to the downturn in the housing market in such a way that their ability to function is threatened.
The companies that insure bond investors against defaults are having to make massive payouts. One, ACA Financial, owes $60 billion that it cannot afford to pay and has been taken over by the Maryland insurance regulator. Its credit rating has been lowered.
Fasten your seat belts. it's going to be a bumpy ride.