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Stocks Look to
Rebound at Open

Major index futures pointed to a higher U.S. open Tuesday amid more developments in the financial crisis

• Plus: European Markets Recover
• Plus: Bonuses and Blame in Lehman's Last Days
• Investing Insights: Why I'm Buying

U.S. stocks were lower in volatile trading Tuesday. Major indexes were struggling to continue Monday's late rally attempt. There were new developments overnight in the global financial crisis, including attempts by the Federal Reserve to shore up the moribund U.S. commercial paper market, along with word that the Reserve Bank of Australia cut its key interest rate 100 basis points, sparking speculation other central banks would follow suit, giving slumping economies a boost.

European finance ministers were meeting in Luxembourg about the crisis, and reached agrrement on deposit guarantees. Minneapolis Federal Reserve Bank President Gary Stern was scheduled to speak Tuesday about the repercussions from the financial shock. Investors were hopeful Fed Chairman Ben Bernanke will shed some light on the government's latest actions in a speech later Tuesday.

The dollar was lower, as were bonds. Gold futures were higher. Oil futures rose back above $90 per barrel.

At around 10:05 a.m. ET Tuesday, the blue-chip Dow Jones industrial average was lower by 59.90 points, or 0.6%, to 9,895.60. The broader S&P 500 index shed 7.04 points, or 0.67%, to 1,049.85. The tech-heavy Nasdaq composite index was off 19.34 points, or 1.04%, to 1,843.62.

Monday's rout brought the Dow's loss for the year to almost 25%. The S&P 500 is now down 28%, while the Nasdaq has lost nearly 30% this year.

"[I]f Monday is to be an important low day in the bear market, strength is needed right away; several strong price and breadth days are needed," says analyst Phil Roth of Miller Tabak.

There was more news from the U.S. banking sector Tuesday, and it was not good. Bank of America Corp. (BAC) posted its third quarter results early, reporting earnings per share of 15 cents, vs. 82 cents one year earlier, with the curren quarter hurt by a significant increase in provision expense, as credit costs continued to rise, partially offset by advances in various income categories largely as a result of its acquisitions of Countrywide Financial and LaSalle Bank. Revenue net of interest expense rose 21% to $19.9 billion.

BofA reduced its quarterly dividend 50% to 32 cents, and commenced a public offering of about $10 billion of of common stock. The two capital-raising initiatives target an 8% Tier 1 capital ratio for the bank.

S&P Ratings Services revised its outlook on Hartford Financial Services (HIG) to negative from stable. S&P affirmed its A counterparty credit rating on Hartford and its AA counterparty credit and financial strength ratings on all of Hartford's core insurance operating units. The negative outlook reflects Hartford's reduced financial flexibility because of the increase in leverage and related material reduction in fixed-charge coverage levels resulting from the investment in the company by Allianz SE (AZ) and an expected softening of its operating performance. A.M. Best placed its rating under review with negative implications.

The Fed announced the creation of the Commercial Paper Funding Facility (CPFF). The Fed will provide liquidity through a special purpose vehicle (SPV), taking on three-month unsecured and asset backed commercial paper. The SPV will be funded by the Treasury. The Fed tentatively plans to run the unit through April 30.

In a knee-jerk reaction, the overnight commercial paper rate fell 74 basis points to 2.94%, reports Action Economics, but the 7-day rate climbed 125 basis points to 4%, while the 30-day rate rose 16 basis points to 4.16%.