Morning traders.Market wrap: Australian stocks face a third day...

Morning traders.

Market wrap: Australian stocks face a third day of heavy losses after Wall Streets worst week in 11 months.

Futures traders expect our market to open at its lowest level since mid-December after a second straight 200+ point plunge on the Dow Jones Industrial Average on Friday. The local March SPI futures contract closed 87 points lower at 4619.

Friday's 217-point fall left the Dow down 552 points in three sessions for its worst week since February last year. The broader S&P 500 fell 2.21% on Friday and 3.9% for the week. The high-flying Nasdaq was hit hardest, down 2.67% as strong earnings reports failed to meet elevated expectations.

The declines in the indexes accelerated late on Friday as President Obama spoke about his plan to limit big banks' speculative trading. Also weighing on the market was growing signs that Ben Bernanke faces a fight to secure a second term as Federal Reserve chairman.

"The chief sponsor of the economy, the Fed, will be in disarray if Bernanke doesn't get reappointed," one U.S. strategist told MarketWatch. "That's a big concern for investors right now."

"This is a correction precipitated by fear about a Chinese slowdown, uncertainty at the Fed and populist rhetoric by Mr Obama on banks," said another U.S. investment strategist.

Bucking the downtrend, GE and McDonalds managed meagre gains after delivering fourth-quarter earnings reports. But AmEx dumped 8.5% despite tripling its net income and Google tumbled 5.7% despite trouncing analyst expectations.

The tech sector suffered heavy losses after Citigroup downgraded a swag of companies. The S&P Bank Index fell 2.34%, telecoms 3.3%, REITs 2.3%, utilities 2.1% and oilers 2%.

The bearish trend in resource prices largely continued. Oil futures finished the week 5% lower as nervous investors fretted over weak demand and a slowdown in China. "There remains ample supply of crude oil and oil products on the U.S. market," analysts at Commerzbank AG told clients. "A particularly bearish indicator is the low demand from U.S. refineries." Crude futures finished Friday at $74.10 a barrel, 2.6% lower for the session.

Gold futures finished the week at their lowest closing level in a month. The spot price closed at $1,091.50 an ounce, off just $1.60 for the session and holding above an important support level.

Base metals were mixed, with evidence of fresh buying interest as prices reach one-month lows. In London, copper rallied 1.65% and aluminium edged 0.3% higher, but there were further losses for lead -0.8%, nickel -2.7%, tin -0.4% and zinc -2.5%.

European markets continued to retreat but pared losses before the close. Britains FTSE finished down 0.6%, Germanys DAX 0.9% and Frances CAC 1.07%.

TRADING THEMES THIS WEEK

HOLIDAY UNCERTAINTY: Tomorrow's Australia Day public holiday complicates today's trading. After three days of heavy selling, there's a good chance that global markets will bounce before our market re-opens on Wednesday. But it's no certainty. This afternoon's action should be very interesting - a rally as traders take positions for a potential bounce or a safety-first fade? I lean towards the latter but will trade any evidence that I'm wrong.

BOUNCE TRADES: Apologies for the repetition but successful trading is about sticking with what works until market conditions change. I outlined my strategy for corrections in Webral's excellent "Trading strategy in a downtrend" thread in the "Day trading" forum over the weekend. There's heaps of useful material there from the regular posters - recommended reading.

ECONOMIC NEWS: The case for further local interest rate rises will be tested this week with the release of Q4 PPI data at 11.30 am today and CPI figures on Wednesday. It's an intense week in the U.S., with a Federal Reserve rate meeting, President Obama's state of the union address, earnings reports from 130 companies in the S&P 500, plus the threat of further delays in the confirmation of a second term for Fed Chairman Ben Bernanke. Tonight in the U.S.: existing home sales data and regional manufacturing.

Good luck to all.