U.S. stocks headed for a drop at Friday's opening that would extend a rout which has pulled the Dow Jones industrials to a fresh bear-market low, as worries about the fate of major banks escalated.

Fears that the U.S. government's bank rescue plan might involve nationalization and that the recession is worsening had investors scurrying toward the relative safety of U.S. government bonds as stocks plummeted in Europe and Asia.

The Dow industrials <.DJI> slid to their lowest close in more than six years on Thursday after hitting a fresh intraday bear-market low.

That breach has investors fretting about the likelihood that the benchmark S&P 500 <.SPX> could also break through its November lows as the gloom persists and retest levels not seen since 1997.

There's a lack of confidence in the government to get us out of this and that has people sitting on their hands and not willing to buy, said Matt McCall, president of Penn Financial Group in Ridgewood, New Jersey. There's that fear that we nationalize banks and this market gets killed.

Before the bell shares of Bank of America were down 7.1 percent at $3.65, while Citigroup declined more than 12 percent to $2.20, and Wells Fargo shed 5.3 percent to $11.38. Year-to-date these stocks are off 72 percent, 62 percent and 59 percent, respectively.

News that New York Attorney General Andrew Cuomo has subpoenaed Bank of America Chairman and Chief Executive Kenneth Lewis over whether the bank withheld information from investors in its purchase of Merrill Lynch may also hurt sentiment.

The Wall Street Journal reported that Lewis was subpoenaed last week.

S&P 500 futures fell 17 points, and were below 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 dropped 155 points, and Nasdaq 100 futures declined 20.50 points.

Lowe's Companies reported a sharp drop in quarterly profit as recession-hit consumers spent less on their homes.

Shares of the second-largest home improvement retailer fell 4.3 percent to $16.25 in premarket trading after the results.

After several near misses, the Dow Jones industrial average <.DJI> this week broke through the low it set in November, taking losses since the record closing high of October 2007 to 46.8 percent.

The backdrop for the latest damage in the market is the failure last week by U.S. Treasury Secretary Timothy Geithner to restore confidence in the financial system when he unveiled a financial sector rescue plan that fueled uncertainty about how banks would be relieved of toxic assets on their books.

There are also concerns that the $787 billion economic stimulus signed into law by U.S. President Barack Obama this week might not blunt the impact of the recession soon enough.

Year-to-date, the S&P 500 is down more than 13 percent, while the Dow has lost about 15 percent.

(Editing by James Dalgleish)

New Jersey New York Investment Merrill Lynch