* Bank nationalization fear grips markets
* Bank of America, Citigroup drop before the bell
* Futures fall: S&P 500 15.9 points, Nasdaq 16, Dow 135
* For up-to-the-minute market news, click [STXNEWS/US]
By Ellis Mnyandu
NEW YORK, Feb 20 (Reuters) - U.S. stock index futures fell on Friday, putting Wall Street on track to extend a rout that has pulled the Dow Jones industrials to a fresh bear-market low as worries about the fate of major banks mount.
Fears that the U.S. government’s bank rescue plan might involve nationalization and that the recession is worsening had investors scurrying toward the relative safety of government bonds, with stocks plummeting in Europe and Asia.
“Breaking support yesterday in the Dow sent a bit of a panic through the market and it’s resonating overseas today,” said Matt McCall, president of Penn Financial Group in Ridgewood, New Jersey. “There’s that fear that we nationalize banks and this market gets killed.”
Before the bell shares of Bank of America (BAC.N) were down 9 percent at $3.58, while Citigroup (C.N) declined 7.2 percent to $2.33, and Wells Fargo (WFC.N) shed 4.3 percent to $11.49. Year-to-date these stocks are off 72 percent, 62 percent and 59 percent, respectively.
News that New York Attorney General Andrew Cuomo has subpoenaed Bank of America Chairman and Chief Executive Kenneth Lewis over whether the bank withheld information from investors in its purchase of Merrill Lynch may also hurt sentiment.
The Wall Street Journal reported that Lewis was subpoenaed last week. For details see [ID:nN19541541].
S&P 500 futures SPc1 fell 15.9 points, and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures DJc1 dropped 135 points, and Nasdaq 100 NDc1 futures declined 16 points.
Lowe’s Companies (LOW.N) reported a sharp drop in quarterly profit as recession-hit consumers curbed spending on their homes. [ID:nN19536764]
Shares of the second-largest home improvement retailer fell 5.8 percent to $16.00 in premarket trading after the results.
The backdrop for the latest damage in the market is the failure last week by U.S. Treasury Secretary Timothy Geithner to restore confidence in the financial system when he unveiled a financial sector rescue plan that fueled uncertainty about how banks would be relieved of toxic assets on their books.
There are also concerns that the $787 billion economic stimulus signed into law by U.S. President Barack Obama this week might not blunt the impact of the recession soon enough.
Year-to-date, the S&P 500 is down more than 13 percent, while the Dow has lost about 15 percent.
Friday’s U.S. economic calendar features the release of the January Consumer Price Index at 8.30 a.m. (1330 GMT).
The Dow industrials closed at a more than six-year low on Thursday, while the S&P 500 suffered a fourth straight day of losses that marked its longest losing streak since October. (Editing by James Dalgleish)