Wall Street To Slide, S&P 500 Faces Key Test

(REUTERS) -- U.S. stock index futures fell sharply on Monday, tracking global equity markets lower as a political impasse in Greece heightened concerns about the Europe's debt crisis as the region struggles to avoid a deepening recession.

Greece's political landscape has been in disarray for a week since an inconclusive election left parliament divided between supporters and opponents of the 130 billion euro ($168.3 billion) EU/IMF bailout, with neither side able to form a government.

The general move out of risky assets, such as equities and commodities, was likely to see the S&P 500 retest an important support level at 1,340 which, if broken, could result in a steeper pullback for the index.

The world markets are all sharply lower on mounting fears over euro land, Europe's potentially steepening recession and worries over a global slowdown, said Peter Cardillo, chief market economist at Rockwell Global Capital. It's all about fear and whether or not the market may hold major support.

There were also growing concerns about a slowdown in China. The world's second largest economy may need a back-up plan to stop economic growth being cut short by a surprise dip in demand at home and abroad that suggests monetary policy easing steps taken since the final quarter of last year are insufficient to deal with the downturn.

S&P 500 futures fell 12.8 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 fell 93 points, and Nasdaq 100 futures lost 24 points.

Three top executives involved with a failed hedging strategy that cost JPMorgan Chase & Co. at least $2 billion and tarnished its reputation are expected to leave the bank this week, sources close to the matter said on Sunday. The shares fell 0.8 percent to $36.66 premarket.

Avon Products Inc. on Sunday said it told Coty Inc. that it would consider the smaller company's $10.7 billion takeover bid and it expected to respond within a week. The shares were trading up 5.5 percent at $21.30 in premarket.

Concho Resources Inc. said it would buy all of the oil and natural gas assets of Three Rivers Operating Company LLC, a portfolio company of private equity firm Riverstone Holdings LLC, for $1 billion in cash.

Yahoo Inc. is replacing its CEO for the third time in as many years, and giving three board seats to a hedge fund led by Daniel Loeb, putting him in a strong position to influence strategy at the struggling Internet company. The stock rose 1.8 percent to $15.47.

AMR Corp., parent of American Airlines, bowed to pressure on Friday from its unsecured creditors, including its largest labor unions, and said it would explore merger options while it is still in bankruptcy.

(Editing by W Simon)