Stocks opened lower Wednesday as economic worries continued to nag the market and sabotage the post-Gustav rally.
The Dow had been up about 250 points at one point on Tuesday but tech weakness, prompted by concerns that the global slowdown will crimp tech spending, sucked the air out of the rally.
"People are glad that oil is selling off but they're more concerned about the economy," Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams, told CNBC.
Crude oil fell another $2, trading below $108 a barrel, amid relief that Hurricane Gustav spared most major oil facilities in the Gulf of Mexico. However, Goldman Sachs cautioned that oil will likely spike back to $149 a barrel by the end of the year. Oil will be supported by robust demand from China, which shut down some of its energy-hungry factories during the Olympics, Goldman said.
Meanwhile, the dollar hit an 11-month high against the euro, on the back of falling oil prices and on widespread worries that while the worst is over for the U.S. economy, it's Europe's turn to face the brunt of the credit crunch.
Lehman Brothers shares slipped following news that Ospraie Fund, a commodities fund in which Lehman has a 20 percent stake, is closing and will return money to investors after incurring big losses this year.
Morgan Stanley is raising $10 billion for a global property fund and plans to put $1.5 billion or more of that into China, shrugging off concerns about a property market downturn, according to a Reuters report.
Meanwhile, shares of Ambac Financial surged following news that the bond insurer gained approval from the Wisconsin Department of Insurance to reactivate its Connie Lee Insurance unit to begin offering coverage of municipal bonds and other public finance instruments.
Also, Ambac showed signs that investors' faith is being restored in its credit standing, as it reported a $2.47 billion unrealized loss in the fair value of July credit derivatives.
In merger and acquisition news, Coca-Cola will pay $2.5 billion for Chinese juice maker Huiyuan, triple its value, tightening its grip on a booming market in the biggest foreign takeover in China.
There are no major economic indicators scheduled ahead of trading, but the Federal Reserve is due to release its beige book survey of the economy at 2pm ET.
"The beige book will reflect the downcast macro conditions expressly outlined in the recent FOMC minutes with an emphasis placed on the deteriorating situation in the housing sector, non-functioning credit markets and the difficulties currently seen in the manufacturing sector," independent research company IDEAGlobal said in an analysis note.
Auto makers will release August sales throughout the day and are expected to post another decline, extending the streak to 10 months as pinched consumers hold off on major purchases.
MONDAY-THURSDAY: Republican National Convention
WEDNESDAY: Weekly mortgage applications; ADP employment report; auto sales; factory orders; crude inventories; Fed's beige book; Earnings from Staples, H&R Block and Hovnanian; GOP VP Candidate Sarah Palin speaks
THURSDAY: Monster employment report; jobless claims; productivity; ISM services index; Fed's Yellen speaks; Earnings from Toll Brothers
FRIDAY: August jobs report; earnings from Nat Semi
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