US stock index futures briefly pared their losses after a drop in jobless claims. Investors remained tentative, however, amid worries about the future of Fannie Mae and Freddie Mac and the impact of geopolitical tensions on oil prices.
Jobless claims fell by 13,000 last week to 432,000; economists had expected a sharper drop of 15,000. The four-week moving average, however, was the highest since the week ended Dec. 1, 2001.
Due out later in the morning is a report on July's leading indicators and the August Philadelphia Fed survey at 10 am ET.
Fannie and Freddie shares have been battered throughout the week and suffered a loss if more than 20 percent on Thursday alone as speculation that they may be taken over by the Treasury and the shareholders wiped out mounted.
Fannie shares fell more than 4 percent in premarket trading to $4.20, while Freddie was off more than 5 percent to $3.08.
An end to short-selling rules is being partly blamed for the selloff and CNBC's Jim Cramer thinks trading in the shares should be stopped for fear of manipulation.
"The government is going to decide how it's going to intervene in this situation and if they do something foolish, wiping out shareholders' equity, the ramifications are going to be real negative and last a real long time," Charles Lemonides, Founder & Chief Investment Officer from ValueWorks LLC, told "Worldwide Exchange."
Futures added to losses as crude oil surged more than $2 a barrel past $118 a barrel climbing for a third straight session, as Washington's missile shield deal with Poland angered Russia, adding to international tension. The dollar lost some of its recent gains vs the euro, yen and pound.
ExxonMobil shares edged higher on the gain in oil
Meanwhile, the Federal Reserve has been checking up on market rumors that Credit Suisse was about to pull a credit line out from under Lehman Brothers, according to the Wall Street Journal. Credit Suisse told the Fed it had no intention of pulling the line, the report said. Lehman shares were off more than 3 percent premarket to $13.29.
In Jackson Hole, Wyo., Federal Reserve Chairman Ben Bernanke will be in focus as he prepares to speak at the annual symposium. The three day event gets underway today and will try to address the financial instability.
Asian stocks closed lower as investors feared exporters will not be able to weather a world economic slowdown, while in Europe banks dragged stocks down and inflation worries came back into the limelight.
STILL TO COME:
THURSDAY: Leading indicators; Philly Fed survey; GM announces investment plans for Ohio plant; Earnings from Gamestop, Heinz, Hormel, Aeropostale, Gap and Intuit
FRIDAY: Fed conference in Jackson Hole begins; Earnings from WPP, AnnTaylor
WATCHERS: Obama is expected to select a running mate this week ahead of the convention
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