Stocks set for bumpy ride

NEW YORK (CNNMoney.com) -- U.S. stocks were poised for a lower start Wednesday as investors awaited more word from the Federal Reserve on the credit situation and weighed Morgan Stanley's $5.7 billion in additional writedowns on its mortgage investments.

At 7:40 a.m. ET, Nasdaq and S&P futures were lower, suggesting a negative open for Wall Street.

The Fed is due to release results of the $20 billion auction it launched on Monday. Investors will be looking to see how much demand there was for the credit facility as they try to determine whether the central bank's moves are helping to thaw frozen debt markets.

Lawrence Summers, a former Treasury Secretary during the Clinton administration who was generally seen as a a fiscal hawk, said in an interview with the Wall Street Journal that a $75 billion stimulus plan will be needed to stave off a recession.

Also on Wednesday, Richmond Fed President Jeffrey Lacker - considered an inflation hawk - is due to speak. His speech will be closely scrutinized for clues about what the Fed might do with interest rates.

Morgan Stanley (MS, Fortune 500) announced it would have an additional $5.7 billion in writedowns on top of the $3.7 billion it had already disclosed. The subprime hit caused it to report a bigger than expected loss in its most recent quarter. Shares of Morgan Stanley, which fell about 3 percent in trading Tuesday ahead of the report, fell another 0.6 percent in pre-market trading immediately after the report.

But in a sign of continued troubles for brokerage firms, the Journal reported that Bear Stearns' (BSC, Fortune 500) top executives will not receive bonuses this year after huge losses from the collapse of its hedge funds that had bet on subprime mortgages.

And while home foreclosures fell 10 percent in November, the biggest one-month drop since April 2006, the level of foreclosures was still up 68 percent from a year earlier, according to a report released early Wednesday from tracking service RealtyTrac.

More signs of trouble in the housing market came in the quarterly report late Tuesday from Hovnanian Enterprises (HOV, Fortune 500), the nation's No. 6 builder in terms of revenue.

The builder posted a much bigger-than-expected loss in the fiscal fourth quarter that ended in October. But shares of its common stock edged up 0.6 percent in after-hours trading after the company announced it would not pay dividends on its Series A preferred stock. It also said it expected to more than $100 million in cash flow from operations in fiscal 2008.

There also were poor earnings late Tuesday from Palm (PALM), maker of the Treo smart-phone, as it saw shares plunge 11 percent in after-hours trading after it reported a loss and said it would post a much bigger-than-expected loss in the current quarter on much weaker-than-expected revenue.

Cereal maker General Mills (GIS, Fortune 500) is due to report results early Wednesday with analysts looking for earnings to grow by 5 percent.

General Motors (GM, Fortune 500) announced late Tuesday that it is raising prices on its 2008 model year vehicles an average of 1.5 percent, citing increasing steel and commodity costs. Earlier in the afternoon the nation's No. 1 automaker announced it had reached a deal with the United Auto Workers union to offer buyouts to 5,200 hourly workers at specific plants.

In global trade, most Asian stock markets rebounded, although Japan's Nikkei tumbled. European stocks were mixed in morning trading.

Oil prices rose 18 cents to $90.26 in early trading Wednesday ahead of the 10:30 a.m. ET report on U.S. fuel inventories, which is expected to show a fifth straight weekly decline in crude stockpiles.