U.S. stock futures pointed sharply lower Tuesday after a series of disappointing earnings reports rekindled fears over the long-term impact of the credit crunch.

In this morning’s earnings news, Wachovia, the fourth largest U.S. bank, said it lost US$8.86 billion in the second quarter, hurt by a big goodwill charge and an increase in reserves for bad loans as mortgage defaults soared.

The North Carolina-based bank cut its quarterly dividend to 5¢ share from 37.5¢. Late Monday Wachovia announced plans to leave the wholesale mortgage lending business.

Here at home, Canadian Pacific Railway Ltd. reported a 40% decline in second-quarter profit as rising fuel costs inflated operating expenses while revenue was flat.

Canadian National Railway Co. reported second-quarter earnings of $459 million, down from $516 million a year ago, as revenue rose 4% to $2.1 billion.

On Monday, second-quarter results for American Express fell 38%.

Apple said its third-quarter earnings rose 31% and beat expectations, but the company issued soft guidance for the current quarter.

Yahoo and Washington Mutual will release quarterly results after markets close Tuesday.

Light sweet crude was up 24¢ at US$131.28 on the New York Mercantile Exchange.

In today’s economic news, Statistics Canada reported that retail sales in current dollars rose 0.4% in May to $35.8 billion. This was the seventh increase in eight months. The advance was primarily attributable to increased sales at gasoline stations, largely owing to significantly higher gasoline prices (+8.8%) in May compared with April 2008.

The Canadian dollar opened at US99.87¢, up 0.01 cent from Monday.

Overseas, the UK FTSE 100 index was down 1.9% in midday trading while the German DAX declined 1.3% and the Paris CAC-40 dropped 1%.

Japan’s benchmark Nikkei 225 index jumped 3% to 13,184.96. The Tokyo exchange was closed for a holiday on Monday.

On Monday, a takeover bid for utility TransAlta Corp. combined with rising oil prices to boost the Toronto Stock Exchange’s main index.

The S&P/TSX composite index gained 173.23 points, or 1.28%, to close at 13,689.19. Half of the 10 main TSX groups finished higher.

TransAlta shares soared $4.86, or 15.1%, to $37.11 after private U.S.-based firms LS Power Equity Partners and Global Infrastructure said they wanted to buy the Canadian company for $7.8 billion.

The junior S&P/TSX Venture composite index fell 11.07 points, or 0.48%, to 2,287.67.

In New York, U.S. stocks slipped as oil turned higher after last week’s sharp drop overshadowing gains in financial stocks after Bank of America’s stronger-than-expected results.

The Dow Jones industrial average fell 29.23 points, or 0.25%, to 11,467.34. The S&P 500 edged 0.68 of a point lower, or 0.05%, to finish at 1,260.00. The tech-heavy Nasdaq composite index slipped 3.25 points, or 0.14%, to 2,279.53.