US Stocks Head for Lower Open after AIG Bailout

NEW YORK - U.S. stocks headed for a lower open Wednesday, with investors still anxious about the financial sector even after the government bailed out the insurer American International Group Inc. and Barclays PLC bought a chunk of Lehman Brothers.

The Federal Reserve is giving a two-year, $85 billion loan to AIG in exchange for a nearly 80 percent stake in the company. Wall Street had been worried that the insurer, which has lost billions in the risky business of insuring against bond defaults, would follow Lehman Brothers into bankruptcy.

Lehman, after filing for bankruptcy protection on Monday, sold its North American investment banking and trading operations to Barclays, Britain's third-largest bank, on Tuesday for the bargain price of $250 million.

The moves lift some of the uncertainty surrounding two of the most precarious pillars of the U.S. financial system, but investors' anxiety is far from erased.

The two independent Wall Street investment banks left standing — Goldman Sachs Group Inc. and Morgan Stanley — remain under scrutiny. Morgan Stanley revealed its quarterly earnings early late Tuesday, posting a better-than-expected 7 percent slide in fiscal third-quarter profit and insisting that it is surviving the credit crisis that has ravaged many of its peers.

Over the weekend, Merrill Lynch, the world's largest brokerage, sold itself in a last-ditch effort to avoid failure to Bank of America Corp.

A day after Wall Street rebounded from its Monday nosedive, Dow Jones industrial futures fell 23, or 0.20 percent, to 11,022. Standard & Poor's 500 index futures fell 4.60, or 0.38 percent, to 1,211.60. Nasdaq 100 index futures fell 11.75, or 0.68 percent, to 1,721.25.

On Monday, the Dow lost 504 points, the largest tumble since its drop following the September 2001 terror attacks. On Tuesday, it rose 141 points, after the Fed decided to leave interest rates unchanged, giving investors a bit of assurance about the direction of the economy and the financial sector.

In economic data Wednesday, the Commerce Department is scheduled to report at 8:30 a.m. Eastern time on new home construction in August. Economists surveyed by Thomson/IFR anticipate a decline in housing starts to 950,000 units from 965,000 units in July.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.47 percent from 3.43 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Crude oil rebounded $3.21 to $94.26 a barrel on the New York Mercantile Exchange. Crude has dropped by about $10 a barrel over the past two days due to concerns that troubles in the financial sector will dampen the economy and cause big funds to unwind their commodities bets.

Overseas, Japan's Nikkei stock average rose 1.2 percent after AIG's rescue, but Hong Kong's Hang Seng index lost 3.6 percent.

In morning trading in Europe, Britain's FTSE 100 fell 2.41 percent, Germany's DAX index rose 0.77 percent, and France's CAC-40 rose 0.51 percent.