Stocks head for big losses

NEW YORK (CNNMoney) -- U.S. stocks headed for a big drop at Wednesday's open after Italy's key bond rate rose above a critical 7% level -- a sign that Prime Minister Silvio Berlusconi's pledge to step down failed to calm world markets.

The Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures fell more than 2%. Stock futures indicate the possible direction of the markets when they open at 9:30 a.m. ET.

Berlusconi's departure could come as late as the first week of December, after a final vote on the budget. And while his pending resignation allows investors to scratch off one item on Europe's long list of worrisome questions, it also raises new questions about the country's future.

Many investors are realizing that this change in leadership isn't going to provide a quick fix to the nation's ongoing debt crisis, said Sebastian Galy, a senior currency strategist at Societe Generale.

It’s fairly obvious at this point that the government has been pumping up the equities markets artificially. They’ve been doing so primarily because public-union pensions and benefits were promised and are paid by the markets having 8% annual growth. Take that away and we are forced into “austerity” (which should be called “reality” or “fairness”).

It is no obvious that the powers that be know that the DJIA should be well south of 8000 and are trying desperately to prevent that reality. They know there will be 300-point drops very frequently. In order to keep the markets high, they have been forced to pump the markets into the 12,000 range. It’s all to create buffer for the drops they know are due.

I’m not anxious for economic collapse. I just want the economy to be where it should be. I want everyone to know what the state of the economy is. We need to pop the bubbles and live realistically so that we can make the changes we need to make (dump all forms of socialism is a good start) in order to enter a new phase of true economic stability and prosperity.

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