Wall Street Set for Rebound After Huge Drop

Wall Street was headed for a rebound Tuesday, a day after stocks logged their steepest losses in years when the House voted down a proposed $700 billion rescue plan for the financial sector.

A snapback of some degree wasn’t unexpected as carnage on Wall Street often attracts bargain hunters. Still, questions remain about how Wall Street will proceed without a bailout plan in place to absorb soured mortgage and other debt from banks’ balance sheets and restore confidence in lending.

While U.S. political leaders have vowed to revisit the issue, it could be several days before lawmakers could reconvene.

In the meantime, investors likely will proceed cautiously. On Tuesday, economic readings could help shape sentiment. A reading of the Chicago Purchasing Managers’ index, which measures business conditions across Illinois, Michigan and Indiana, is due shortly after the opening bell, as are figures on consumer confidence.

But it’s likely Wall Street will remain focused on Capitol Hill and the prospects for resurrecting the government’s bailout effort, which was backed by leaders of both parties.

Advocates for the rescue plan say it is necessary to jump-start moribund credit markets, which are where businesses turn to finance their day-to-day operations. But fears of bad debt have made banks and other financial houses nervous about lending.

It has become more expensive and difficult to borrow for businesses and consumer alike, a headwind for the economy.

Dow Jones industrial average futures rose 200, or 1.91 percent, to 10,674 after falling more than 777 points, or 6.98 percent, Monday. It was the blue chips’ largest point drop and 17th largest percentage drop.

Standard & Poor’s 500 index futures rose 31.60, or 2.82 percent, to 1,150.10, and Nasdaq 100 index futures rose 32.25, or 2.13 percent, to 1,544.25.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.68 percent from 3.58 percent late Monday. The dollar was mixed against other major currencies, while gold prices rose.

The “sell” orders that swept across Wall Street on Monday spread to Asia. Japan’s Nikkei stock average fell 4.12 percent. But Hong Kong’s Hang Seng index rose 0.76. In morning trading, Britain’s FTSE 100 rose 0.27 percent, Germany’s DAX index fell 1 percent, and France’s CAC-40 slipped 0.02 percent.