For stocks, high anxiety rules

By Vivianne Rodrigues and Leah Schnurr

WASHINGTON/NEW YORK (Reuters) - Anxiety on Wall Street won't subside this week as the deepening credit crunch pushes the global economy into recession, but steps being taken by governments and central banks to solve the financial crisis may attract some bargain hunters and give stocks a boost.

On the heels of a panic-riddled sell-off that caused the Dow industrials and the S&P 500 to plummet for eight days in a row, finance ministers and central bankers from the Group of Seven met on Friday -- followed by meetings of the Group of 20, the International Monetary Fund, World Bank officials and European leaders over the weekend -- to discuss jammed credit markets and the staggering global economy.

European leaders on Sunday further agreed to provide capital, insure or directly buy into new bank debt issues, in a move that may inject cash into the region, easing risk aversion and helping boost demand for global equities.

"They're stepping up to the plate with all their firepower. You will see a reasonable market reaction," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

U.S. stock futures on Sunday evening suggested a higher opening on Wall Street following the announcement of the measures in Europe. S&P 500 futures rose 29.8 points. Dow Jones industrial average futures were up 252 points, and Nasdaq 100 futures climbed 31.25 points.

The rebound in stock futures came after the worst week on record for the Standard & Poor's 500 Index .SPX, which closed on Friday below the 900 level for the first time in 5-1/2 years. At Friday's closing bell, both the Dow Jones industrial average .DJI and the S&P 500 were down 18.2 percent for the week, while the Nasdaq Composite Index .IXIC was down 15.3 percent.

"The sharp drop in (stocks) we've seen in the past week may bring back some bargain hunters," said Kathy Lien, head of research at GFT Forex in New York. "It seems central banks and the finance leaders are finally beginning to move in a coordinated manner. This may be good for U.S. stocks. Prices are really depressed."

Since the beginning of October alone, all three major indexes have skidded more than 20 percent.

On Monday, the U.S. Treasury bond market will be closed for the Columbus Day holiday. But the stock market will be open.

BLITZ OF BANK NEWS AND GM, TOO

Last week's coordinated interest-rate cuts from global central banks, including the Fed, failed to put an end to the nosedive in stocks as investor confidence remained severely strained.

Analysts said they were hoping to see a coordinated move come out of the G7 to ease the cost for banks to borrow overnight dollars from, or among, each other.

"The nature of their problems are so enormous that there is only one backstop that can really deliver market calm and take the panic nature out of the sell-off, and that is the central banks working in a coordinated fashion," said Kenny at Knight Equity Markets. "It is not going to be overnight, but it is going to help a lot. It is going to take the edge of panic off market psychology."

On Friday evening, Treasury Secretary Henry Paulson said the United States was planning to buy equity stakes in financial institutions to help recapitalize banks.

And while markets may welcome the news, very serious company issues still hang over Wall Street.