Stocks set for drubbing

U.S. stocks expected to tumble at the open as investors react to massive quarterly loss from AIG and bailout restructuring.

NEW YORK (CNNMoney.com) -- Stocks could take a beating at Monday's open on Wall Street after American International Group reported a massive quarterly loss and a restructuring of its bailout by the government.

At 7:52 a.m. ET, Standard & Poor's 500, Nasdaq-100 and Dow Jones industrial average futures were sharply lower.

The Dow and S&P begin the week at their lowest levels in about 12 years, after tumbling last week on market anxiety over the state of the global economy and the world financial system. At its current rate of decline, the Dow could easily slip below its 7,000 mark on Monday.

"There's a buyer's strike right now in the stock market," said Art Hogan, chief market strategist at Jefferies & Co.

He blamed the decline in futures on "ongoing concerns about the global recession," noting that the European indexes were down 3% to 4%.

Asian markets closed lower, with Tokyo's Nikkei down 3.8%.

Dave Rovelli, managing director for Canaccord Adams, said investors were also unhappy with the government's $30 billion "donation" to AIG, because there are no expectations that the government will ever get its money back.

"How is [AIG] going to pay it back?" said Rovelli. "With what? There's no way in God's name that [the government] is going to recoup the money they've lent them."

AIG: AIG (AIG, Fortune 500), whose status as a Dow component may be in jeopardy, reported a worse-than-expected $61.7 billion loss for the fourth quarter of 2008.

The company blamed "severe credit market deterioration," particularly in mortgaged-back securities, as well as charges from ongoing restructuring activities.

In addition, the insurer and the government announced a restructuring of the $150 billion bailout agreement. Key components included the government's decision to commit another $30 billion to the firm in exchange for cumulative preferred stock, and an exchange of an existing $40 billion preferred shares stake for shares that more closely resembles common stock.

Shares of AIG were indicated to open up 10 cents at 52 cents, bucking the market-wide plunge.

Job cuts: Europe's leading bank, HSBC (HBC), said Monday that it would cut 6,100 jobs, all of them in the United States. The bank also said it would close most of the branches of its U.S.-based consumer lending businesses, HFC and Beneficial.

In addition, the bank announced a full-year profit of $5.7 billion, down 70% from $19.1 billion in 2007. HSBC stock fell more than 20% in pre-market trading.

Economy: Besides AIG, the day will include some major economic reports.

Before the opening bell, the government releases the personal income and spending data for January. Personal income is expected to have declined by 0.3% after falling 0.2% in the previous month, according to a consensus of economists surveyed by Briefing.com. But spending is expected to have risen by 0.3% after falling 1% in December.

The core PCE deflator, the report's inflation component, is expected to have risen by 0.1% versus a flat reading in December.

After the open, the Institute for Supply Management issues in February report on manufacturing. The purchasing managers' index is expected to have declined to 34 from 35.6 in January, remaining deep in recessionary territory.

Also after the open, a government report on construction spending is expected to show a 1.5% drop in January after a 1.4% swoon in the previous month.

Buffett: Investor Warren Buffett's Berkshire Hathaway (BRK.A) reported the worst results in the 44 years he has run the company, and only the second decline in net worth in that time. In his report to shareholders Saturday, Buffett said Berkshire's net worth fell in 2008 by $11.5 billion.

Oil and money: Oil fell $1.18 to $43.58 in electronic trading. The dollar was lower against the euro and pound, but higher versus the yen