Stock futures lower as investors watch earnings

Wall Street headed for a sharply lower open Wednesday as investors again shifted their focus away from improving credit markets and fixated on worrisome corporate earnings that are raising fears of a deep and painful recession.

While reduced strains in world credit markets have eased some investors' nervousness about the economy, market anxiety remains high as hundreds of companies this week release third-quarter earnings and in some cases fourth-quarter forecasts that offer a glimpse of the rough conditions that may lay ahead.

On Wednesday, commercial and personal property insurer Travelers said hurricane-related losses pushed third-quarter profit down 82 percent and forced it to lower its full-year outlook.

In other earnings, Wachovia Corp., which is being bought by Wells Fargo & Co., said it swung to a huge loss in the third quarter while the drugmaker Merck & Co. said its quarterly profit fell 28 percent and that it would cut more than 10 percent of its work force.

Ahead of the market's open, Dow Jones industrial average futures fell 259, or 2.87 percent, to 8,776. On Tuesday, the Dow retreated 231 points after forecasts from DuPont Co., Sun Microsystems Inc. and Texas Instruments Inc. raised fears that companies' outlooks for the fourth quarter and beyond could signal a severe economic downturn.

The Standard & Poor's 500 index futures fell 32.50, or 3.39 percent, to 926.80, and the Nasdaq 100 index futures fell 24.00, or 1.86 percent, to 1,268.50.

Meanwhile, credit markets showed more signs of improvement after virtually freezing up last week. Bank-to-bank lending rates fell sharply overnight, indicating that credit is becoming easier to obtain. The London Interbank Offered Rate, or Libor, on three-month loans in dollars fell to 3.54 percent from 3.83 percent, dropping for an eighth straight day.

Demand for Treasury bills, regarded as the safest assets around, grew slightly compared to the previous day as economic worries led investors to shun risky assets in favor of government bonds.

The three-month Treasury bill yielded 1.03 percent, down from 1.07 percent late Tuesday. The levels are a notable improvement from the 0.20 percent seen last Wednesday, when investors were willing to take the slimmest of returns in exchange for a safe place to keep their money.

The dollar was sharply higher against other major currencies, while gold prices fell.

In other corporate news, AT&T Inc. said its third-quarter earnings rose 5.5 percent but missed analyst expectations in part because of strong sales of iPhones, which the carrier subsidizes.

Light, sweet crude fell $3.23 to $68.95 a barrel in premarket electronic trading on the New York Mercantile Exchange. On Tuesday, prices fell to $70.89 as a stronger dollar dented demand for commodities and overshadowed worries about a planned OPEC output cut.

Financial markets overseas were down sharply.

Japan's Nikkei stock average fell 6.79 percent. Britain's FTSE 100 was down 3.80 percent, Germany's DAX index fell 3.22 percent, and France's CAC-40 was down 3.91 percent.

(Copyright 2008 by The Associated Press. All Rights Reserved.)