By Ellis Mnyandu
NEW YORK (Reuters) - Stocks headed for a slide at the open on Friday after congressional talks on a $700 billion financial sector bailout broke down and authorities seized the largest U.S. lender, heightening worries about the credit crisis' impact.
Adding to worries about the economy, a government report before the opening bell showed growth last quarter was weaker than previously thought due to softer spending.
U.S. bank regulators Thursday night closed Washington Mutual , which had $307 billion of assets and $188 of deposits. They brokered a sale of the thrift's assets to JPMorgan Chase & Co , the third-largest U.S. bank, for $1.9 billion.
"I'm afraid that the real economy is unraveling very quickly," said Nigel Gault, chief U.S. economist at Global Insight in Lexington, Massachusetts.
Congressional leaders were set to try again on Friday to agree on a financial sector rescue plan, one of the costliest since the Great Depression, after talks descended into chaos overnight. Meanwhile, investors moved to pare back risk, with stock markets falling in Asia and in Europe.
"I think with no agreement, it's going to be hard for the market to push ahead," said Rick Meckler, president of investment firm LibertyView Capital Management in New York.
S&P 500 futures fell 26 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 187 points and Nasdaq 100 shed 48 points.
It was uncertain whether a group of balking House Republicans would participate in the talks on the proposed bailout.
Financial stocks were under pressure, with the U.S. electronic-traded fund that tracks the financial sector down 5.2 percent before the bell.
The failure of Washington Mutual was the latest blot on the U.S. financial landscape, coming nearly two weeks after investment bank Lehman Brothers Holdings filed for bankruptcy protection.
Shares of JPMorgan declined 7 percent to $40.45, and bank Wachovia Corp fell 16 percent to $11.52.
Across the world, central banks scrambled to meet a desperate demand for cash, both in their own currencies and the U.S. dollar, as news of the bailout hitting new roadblocks kept nervous banks from lending to each other.
The Commerce Department said GDP, the measure of total goods and services output within U.S. borders, expanded at a 2.8 percent rate in the April-June quarter, down from the 3.3 percent rate it estimated a month ago.
(Additional reporting by Herb Lash, Editing by Kenneth Barry)
