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RTRS: US STOCKS-Futures drop on credit woe, bailout anxiety
 
By Ellis Mnyandu

NEW YORK, Oct 2 (Reuters) - U.S. stock index futures fell in choppy trade on Thursday as a freeze in the credit markets and caution about the fate of the $700 billion financial sector rescue plan kept investors on edge until a House of Representatives vote.

The U.S. Senate endorsed a reworked version of the bailout on Wednesday, two days after the House rejected an initial plan that triggered the biggest slide in U.S. stocks in more than two decades.

In the latest sign of faltering consumer and business spending, hotel operator Marriott International Inc (MAR.N: Quote, Profile, Research, Stock Buzz) warned that 2009 would be tough. The news from the hotel operator underscored a tough spending environment as consumers grapple with rising unemployment and falling home values.

Investors are nervous about how the House will vote, probably on Friday, on a measure designed to loosen up lending and stave off turmoil in the broader economy.

U.S. President George W. Bush, speaking after the 74-25 Senate vote, called the bailout "essential to the financial security of every American."

However, some on Wall Street were skeptical about the bill's chances after Monday's surprise loss in the House.

"I'm not betting on anything here because I don't know what the House is going to do," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"If this bill doesn't pass in the House, it's game over. The House tomorrow has an opportunity to potentially stave off a complete economic collapse."

S&P 500 futures SPc1 fell 12.10 points and were about even with 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 fell 96 points and Nasdaq 100 NDc1 slid 13 points.

Credit market constraints persisted on Thursday, with the cost of borrowing dollars over three months again shooting higher.

Should the House pass the bailout bill, it would go to the White House for signature into law by President Bush.

In other earnings news, Swiss bank UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz) offered reassuring comments about its profit outlook, saying it will make a small quarterly profit after a year of losses as it starts to turn the corner even as the credit crisis engulfs many rivals.

Federal Reserve officials are weighing further interest rate cuts even if Congress approves a $700 billion financial industry bailout because of a worsening economic outlook, the Wall Street Journal said on Thursday.

But a rate cut is still far from certain, partly because of inflation worries, the Journal said in an unsourced report on its website.

A report on weekly jobless claims is scheduled for release at 8:30 a.m. (1230 GMT), and data on August factory orders is due at 10 a.m. (1400 GMT).

U.S. stocks fell on Wednesday as tight credit markets and bleak economic data kept investors on edge before the Senate vote on the financial sector bailout.

(Editing by Kenneth Barry)

Source