Stocks poised to take another beating

NEW YORK (CNNMoney.com) -- Wall Street was bracing for another down day Thursday after credit worries sent overseas market tumbling, more worrisome news from mortgage lender Countrywide Financial and the housing sector.

At 9:05 a.m. ET, Nasdaq and S&P futures had moved off their lows but still pointed to a sharply lower open based on a comparison to fair value.

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Treasury yields fell sharply as stocks looked to retreat, with the yield on the 2-year note falling to its lowest level in nearly 2 years. The yield on the benchmark note fell to 4.68 percent.

More grim news emerged from the troubled housing market before the opening bell as housing starts fell to their lowest level in over 10 years during the month of July, the government reported, missing expectations.

Building permits, often taken as a sign of builders' reading of the markets, also fell short of forecasts, hitting their lowest level in nearly 11 years.

Still the credit worries sparked by problems in the U.S. subprime mortgage market continued to take center stage around the globe.

Countrywide Financial (Charts, Fortune 500), the nation's largest originator of home loans, announced it was tapping a previously arranged $11.5 billion line of credit in order to give it the liquidity it needs to continue operations. It also said it would "materially tightened its underwriting standards" for new loans.

Shares of Countrywide, which lost 13 percent of their value in pre-market trading Wednesday.

The mortgage lender has seen much of the demand for its mortgage-backed securities dry up in recent weeks in the face of rising delinquencies and defaults for its loans. That credit crunch sparked fears Wednesday that the company could be facing the risk of bankruptcy, and it helped spark a selloff in the broader U.S. stock market.

Overseas, Rams Home Loans Group, the largest mortgage lending in Australia, saw its shares sink 60 percent, sparking selling across Asia, after it announced it failed to refinance $5 billion in debt due its exposure to the U.S. subprime mortgage market.

Central banks in Japan and Australia followed the Federal Reserve in pumping liquidity into those economies Thursday, but overseas stocks still fell sharply in Thursday trading. Stocks in Asia plunged, and major European markets fell sharply after the open.

Art Hogan, chief market analyst at Jefferies & Co., said the worries about a credit crunch are building around the globe, positioning U.S. markets for another particularly tough day.

"It seems like we've got a synchronized global securities selloff," he said. "I think the real sense is we'll follow suit with Europe and Asian markets and they're all down in the 2-3 percent range."

"This is feeling like the capitulation day if ever there was one," he said. "It looks like the worse case scenario is upon us, at least in the short-term."

Hogan said that Countrywide's announcement may calm fears about a possible bankruptcy, but raise fears about its earnings going forward.

"We'll see if that will be enough to stem the tide, or is going to be perceived as a last gasp effort," he said.

Hopes that the Federal Reserve might step in to help markets with an early interest rate cut took a hit following a comment from St. Louis Federal Reserve President William Poole said in a televised interview late Wednesday that the U.S. central bank should not move on rates before its Sept. 18 meeting.

"That didn't help," said Hogan about Poole's comment.

Treasury Secretary Henry Paulson told the Wall Street Journal that the turmoil in financial markets will slow U.S. economic growth but should not spark a recession.

In a report published Thursday, he told the newspaper that some funds or businesses may go under as a result of the turmoil, but that he expects the U.S. economy to keep growing.

Concerns about housing and rising mortgage delinquencies and defaults helped spark another selloff in U.S. stocks late Wednesday that took the Dow Jones industrial average to a four-month low.

In corporate news, biotech Amgen (Charts, Fortune 500) said late Wednesday that it will cut 14 percent of its staff and warned that 2007 earnings won't meet forecasts.

Data-storage equipment maker Network Appliance (Charts) announced Wednesday a share buyback and forecast better-than-expected revenue for the current quarter as orders pulled out of a slump. Its recently battered stock rose nearly 6 percent in after-hours trading.

Charter Communications (Charts, Fortune 500) chairman and controlling shareholder Paul Allen said he's considering buying the remaining outstanding stock in the troubled cable company, according to a report late Wednesday in the Wall Street Journal. Its shares gained 2.3 percent in after-hours trading.

Dow component Hewlett-Packard (Charts, Fortune 500) is due to report results after the closing bell Thursday, with analysts forecasting improved earnings there.

One builder whose stock could be under pressure Thursday, no matter the state of starts and permits, is Beazer Homes USA (Charts, Fortune 500). A column in the Wall Street Journal said its recent disclosure of accounting problems is expected to accelerate a months-long government inquiry into whether or not it violated securities laws.

The dollar gained against the euro but plunged against the yen, as the Japanese currency rose to a 5-month high against the greenback.

Oil prices fell sharply in early trading on concerns that the credit crunch will lead to lower consumption. The price of U.S. light crude lost $1.54 to $71.79 a barrel in electronic trading.