Wall Street Set for Shaky Start after Global Rout

The Dow Jones news ticker is reflected on a window at the NASDAQ building just before the closing bell, Monday, Oct. 6, 2008 in New York's Times Square. Wall Street suffered through another extraordinary and traumatic session Monday, with the Dow Jones industrials plunging as much as 800 points _ their largest one-day point drop _ before recovering to close with a loss of 370. (AP Photo/Mary Altaffer)

NEW YORK - Wall Street headed to a shaky start Tuesday after a huge sell-off the previous session, with investors waiting to see if central banks would try to alleviate the ongoing turmoil in the credit markets by cutting interest rates.

Australia's central bank cut interest rates by the largest amount since 1992 in a surprise move, and that reignited hopes that others including the Federal Reserve and European Central Bank might follow. The move helped Asian markets, and later European bourses, rebound from a global rout in stocks on Monday.

U.S. investors were optimistic early in the morning, but that upbeat sentiment was receding when no Fed cut was announced in the hour before trading began on Wall Street.

Investors believe a rate cut will help reanimate the credit markets that have been stagnant for weeks. The markets seized up after the failure of Lehman Brothers Holdings Inc., and banks have been reluctant to lend to most customers, including other banks, fearing they won't be repaid.

Dow Jones industrial average futures gave up an earlier moderate gain and fell 12, or 0.24 percent, to 9,952. Standard & Poor's 500 index futures rose 2.90, or 0.27 percent, to 1,056.20, while Nasdaq 100 futures rose 3.50, or 0.25 percent, to 1,410.00.

In Asia, the Nikkei 225 closed 3.58 percent lower, responding to a turbulent session Monday on Wall Street, where the Dow Jones industrials skidded as much as 800 points before closing with a loss of 370.

Europe markets were mixed after being up uniformly earlier. In Britain, the FTSE-100 rose 1.16 percent, Germany's DAX fell 0.21 percent, and France's CAC-40 rose 1.14 percent.

Financial markets around the world have taken a bleak view of the global economy, believing that government bailouts including the $700 billion plan to rescue battered U.S. banks won't in the near term limit the damage to the banking systems of many countries.

Monday's sell-off put the Dow below 10,000 for the first time in four years, and that will likely bring some buyers into the market looking for bargains. Wall Street rallied in the final 90 minutes of trading Monday, with some of the buying driven by speculation that a rate cut was in the offing.

Both Fed Chairman Ben Bernanke and European Central Bank President Jean-Claude Trichet have speeches scheduled Tuesday, and the Fed is due to release minutes from the last interest-rate setting meeting.

Though not giving the market a rate cut that many traders have been clamoring for, the Fed has taken other steps to help unclog the credit markets. On Tuesday, policymakers provided more details about when it will make $900 billion in short-term loans available to squeezed banks.

The loans — part of an effort to ease intensifying credit stresses — are made available to banks through auctions. The Fed, in coordination with other countries' central banks engaged in similar efforts, laid out dates that it will conduct the auctions through the rest of this year.

In addition, the Fed is working with the Treasury on a plan to buy commercial paper, the short-term financing mechanism that many companies rely on to fund day-to-day operations, according to a person with knowledge of the plan. The person asked not to be identified because the plan is still being put together.

Traders might get a better idea of what central bankers are thinking when the Fed releases minutes from its Sept. 16 meeting. Policymakers, who will meet again later this month, previously left its key interest rate unchanged at 2 percent.

Concerns about the credit markets still pushed investors into the relative safety of government debt. Investors moved into longer-term Treasury bonds, with the yield on the 10-year note fell to 3.48 percent from 3.58 percent late Monday.

However, speculation that the Fed might cut interest rates caused yields on shorter-term debt to rise. The yield on the three-month Treasury bill rebounded to 0.64 percent from 0.50 percent late Monday.

Demand for Treasurys remains high because of their safety; investors are willing to take extremely low returns just to have their money in a secure place.

Oil prices rebounded to near $90 Tuesday, a day after plunging to an eight-month low on concerns a global recession will undermine demand for crude. Light, sweet crude rose $3.07 to $90.88 a barrel in electronic trading on the New York Mercantile Exchange.

In corporate news, Bank of America Corp. is expected to fall after reporting late Monday that profits fell 68 percent during the third quarter. The bank also said it will raise $10 billion by issuing common stock and slashed its dividend.

Technology stocks got a boost after chip maker Advanced Micro Devices Inc. said it will spin off its manufacturing businesses into a new joint venture with Abu Dhabi-backed Advanced Technology Investment Co. AMD said the deal will dramatically cut costs and allow it to better compete with chief rival Intel Corp.

Wall Street is also looking for Alcoa Inc. to unofficially kick off earnings season when it releases results after the closing bell. The company is expected to report a profit of 51 cents per share, down from 55 cents in the year-ago period.