US STOCKS-Wall St. set for further drop; Bear Stearns off 01 Aug 2007 20:08
US STOCKS-Wall St. set for further drop; Bear Stearns off 01 Aug 2007 20:08

(Updates with drop in Bear Stearns' stock, updates prices)

By Jennifer Coogan

NEW YORK, Aug 1 (Reuters) - U.S. stock index futures fell on Wednesday, suggesting Wall Street will add to Tuesday's steep losses and join a global equities sell-off fueled by fears about deteriorating credit conditions.

Among the latest signs of a credit crunch, Bear Stearns Cos Inc. <BSC.N> said it halted redemptions in a third hedge fund after nervous investors wanted to withdraw their money. For details, see [ID:nN31256815]. Previously two hedge funds managed by the investment bank collapsed as a result of the subprime mortgage meltdown.

Bear Stearns' stock fell more than 3 percent to $117.24 before the opening bell.

Futures trimmed losses after Treasury Secretary Henry Paulson said in Beijing the market impact of the subprime mortgage crisis was largely contained. [ID:nBJC000058].

But some market analysts were skeptical.

"Paulson is just being a cheerleader. I take what he says and anybody out of Washington with a grain of salt," said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York. "We've been hearing from him (the housing issue) has been contained for a year, so are we supposed to take what he says now to heart?"

Australia's Macquarie Bank <MBL.AX> warned on Wednesday that retail investors in two of its funds face losses of up to 25 percent, rattling Asian markets and sending the MSCI Asia-Pacific ex-Japan index <.MIAPJ0000PUS> down more than 4 percent.

"Even if the economic data today is positive, the market's main focus will remain tied to the credit problems. Until the market is convinced it's not going to spread, volatility is the name of the game," said Peter Cardillo, chief market economist at Avalon Partners in New York.

S&P 500 futures <SPc1> dropped 11.9 points, below fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Dow Jones industrial average futures <DJc1> sank 92 points, and Nasdaq 100 <NDc1> futures lost 10.25 points.

The Dow industrials fell nearly 150 points on Tuesday after a U.S. mortgage lender said it may have to liquidate assets because of the housing slump. (Additional reporting by Ellis Mnyandu) ((Reporting by Jennifer Coogan

Editing by Kenneth Barry

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