By Ellis Mnyandu
NEW YORK (Reuters) - Stock index futures fell on Tuesday as fears that the U.S. housing slump will spawn more losses for the financial sector caused investors to pare back risk.
As a result, Wall Street was poised to extend declines seen in Asia and in Europe.
Adding to gloom about the financial sector was a forecast
by JPMorgan Securities that Lehman Brothers
Additionally, worries about the stability of home finance
providers Fannie Mae
"What is unnerving the market is the ebb and flow of the credit concerns," said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey. "There just seems to be a high degree of uncertainty. Just when you think you've seen the worst, more skeletons come out."
S&P 500 futures fell 5.20 points and were slightly below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.
Dow Jones industrial average futures declined 41 points and Nasdaq 100 futures slid 7 points.
Although the recent pullback in global commodity prices has helped buoy hopes of a revival in consumer spending and that inflationary pressures will recede, analysts said the fear now, though, was that the price drops reflected a looming downturn in the global economy.
The Bank of Japan on Tuesday delivered its bleakest assessment of the economy since the 1997/98 Asian financial crisis in a sign that a global slump sparked by the U.S. credit crunch may be spreading too quickly for Japan to avert recession.
Home Depot Inc
Government economic reports will include the Producer Price Index for July and housing starts, both due at 8:30 a.m. EDT.
Producer prices probably rose more modestly in July than in June, according to a Reuters poll, helped by moderating oil prices that have eased fears about inflation.
Housing starts are estimated to have slipped in July as builders try to cut inventory and counter weak demand. Economists polled by Reuters estimated that on a seasonally adjusted, annualized basis, housing starts totaled 960,000 in July, down from 1.066 million in June.
A report during the weekend said government officials may have no choice but to effectively nationalize Fannie Mae and Freddie Mac, a move that would likely wipe out current common stock holders.
U.S. stocks sank on Monday as the prospect of more losses from the mortgage crisis hurt the shares of banks and the two biggest home finance providers, pushing all three major indexes down about 1.5 percent.
(Editing by Kenneth Barry)
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