Stocks could start ugly

NEW YORK (CNNMoney.com) -- Stocks were poised to fall sharply Wednesday as the troubled subprime mortgage sector once again shook investors around the world.

At 7:58 a.m. ET, futures were lower, with a comparison to fair value pointing to heavy losses for Wall Street amid more signs that subprime problems are spreading.

But the futures rebounded off earlier lows following remarks from Treasury Secretary Henry Paulson that market impact of the U.S. subprime mortgage fallout is largely contained and that the global economy is as strong as it has been in decades.

Also lifting futures off of earlier lows is a report from job placement firm Challenger, Gray and Christmas that showed planned job cuts in July fell 23 percent from June to a 12-month low.

Overseas markets were hammered in earlier trading. Asian markets plunged and European stocks sank in early trading.

U.S. stocks tumbled Tuesday after American Home Mortgage Investment Corp. (Charts) said that lenders had cut off its access to credit and that it may have to liquidate its assets. The mortgage provider also said it wouldn't be able to fund $450 million to $500 million of loans.

A third Bear Stearns (Charts, Fortune 500) hedge fund that is reportedly in jeopardy also added to jitters. The Wall Street Journal reported Tuesday night that a Bear Stearns fund with about $900 million in mortgage investments is refusing to return investors' money.

Subprime worries have bubbled at the surface ever since the meltdown last month of two Bear Stearns hedge funds heavily invested in the sector that gives home loans to borrowers with weak credit. Uncertainty about how wide the problems will spread has contributed to wild swings in the market.

In major corporate news, Rupert Murdoch finally won his battle for the publisher of the Wall Street Journal. Dow Jones (Charts) agreed to be taken over by News Corp. (Charts) for $5.6 billion.

Time Warner, (Charts, Fortune 500) which owns CNNMoney.com, reported second-quarter earnings that topped analysts' estimates and said it has authorized an additional $5 billion stock repurchase.

On the economic front, the Institute for Supply Management's report on nationwide manufacturing activity is due at 10 a.m. ET, with economists forecasting that closely watched index slipped to 55.5 for July from 56.0 in June. But any reading above 50 is a sign of growth in that sector.

Also due at 10 a.m. is the National Association of Realtors' report on pending home sales, a more forward looking reading on existing home sales activity than its main home sales report. Economists are forecasting that index will continue to slide, falling 0.6 percent.

U.S. auto sales are also on tap, with sales tracker Edmunds.com forecasting an 8 percent drop in industrywide sales, with General Motors (Charts, Fortune 500) and Ford Motor (Charts, Fortune 500) both expected to post far larger declines. This could be the first month on record that domestic brands fall below 50 percent of overall U.S. sales.

Treasury prices rose as the renewed fears sparked a flight to quality. The yield on the benchmark 10-year note fell to 4.72 percent from 4.74 percent late Tuesday. Bond prices and yields move in opposite directions.

Oil prices eased ahead of the the government's weekly report on crude inventories, due at 10:30 a.m. ET, after setting a record close Tuesday. U.S. light crude for September delivery lost 35 cents to $77.86 a barrel in electronic trading.

The dollar gained against the euro and was little changed versus the yen.