U.S. Stock Futures Drop Amid Greek Default Fears

Stock futures in the U.S. markets sped up their losses on Tuesday as Greece’s ability to avoid default becomes increasingly dire. Futures on the Dow Jones Industrial Average fell 111 points to 10,418 and those on the Standard & Poor’s 500 stock index dropped 12.5 points to 1,073.80. Nasdaq 100 futures declined 20.5 points to 2,044.70. The blue-chip Dow index fell 2.4% on Monday to post its lowest close since September 2010.

Also, European equity markets fell deeper into negative territory as European finance ministers are delaying making a decision on Greek bailout funds until later in October. It was expected that a decision would come this week. Greece says it only has money to pay its bills through mid-October.

On Sunday, the Greek government admitted that it won’t meet its deficit reduction targets. Also, the European finance ministers suggested private bondholders of Greek debt will have to take greater losses.

It looks like the fears of investors may very well come to fruition and a domino-effect will take place if Greece does indeed default. This has Germany’s market on edge as well as other European markets. Germany’s DAX 30 index fell 4% today while the euro held at $1.3174 after sinking on Monday. Shares of DEXIA plunged 14% in Brussels on fears that the French-Belgian bank would be split up. It is expected that French banks will incur heavy losses if Greece defaults.

Back in the U.S., investors will be waiting to hear from United States Federal Reserve Chairman Ben Bernanke. The chairman is scheduled to testify before the Joint Economic Committee at 10 a.m. ET.

Bernanke will undoubtedly face questions about the effectiveness of its so-called “Operation Twist”, in which it swaps short-maturity bonds for longer-maturity securities, as well as about the flailing economic recovery and the concern about U.S. bank exposure to the European debt situation.

written by Kyle Pinder

Kyle Pinder has has over five years trading and research experience in the large cap space. While still in grad school, Kyle trades daily and keep Active Investor up to date with the latest breaking news coming out of Wall Street and Washington.

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