Testimony likely to set market's tone

By Ellis Mnyandu

NEW YORK (Reuters) - The S&P 500 was poised to open little changed on Tuesday before key congressional testimony on the financial bailout, but tech stocks could start higher, boosted by a decline in oil prices.

In testimony to be delivered to a Senate committee, a copy of which was obtained by Reuters, Federal Reserve Chairman Ben Bernanke said, "Action by Congress is urgently required to stabilize the situation and avert what could otherwise be very serious consequences for our financial markets and our economy."

Investors worry that political wrangling over the $700 billion package proposed by the Bush administration might snag the passage of what is likely to be one of the costliest U.S. bailouts since the Great Depression.

Financial shares were poised to weigh on the market as they did heavily on Monday, when the benchmark S&P 500 .SPX fell nearly 4 percent. Shares of JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz), Wells Fargo (WFC.N: Quote, Profile, Research, Stock Buzz) and Washington Mutual (WM.N: Quote, Profile, Research, Stock Buzz) all drifted lower before the bell.

A drop in oil prices might offer some market support, with U.S. front-month crude down $1.91 at $107.43 a barrel.

"From what I'm seeing and hearing, Bernanke is basically putting pressure on Congress to do something right now," Matt McCall, president of Penn Financial Group in Ridgewood, New Jersey.

"I think it's probably just more of a ploy to put some pressure on Congress, but I don't think he should be speaking like that unless he felt that way because that's obviously going to put pressure on the stock market."

S&P 500 futures fell 2.20 points but were above 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 slipped 7 points and Nasdaq 100 futures climbed 14.75 points.

Influential Oppenheimer & Co bank analyst Meredith Whitney cut her outlook on U.S. banks, saying the government bailout plan has little hope of improving core fundamentals over the near and medium term. She forecast more dividend cuts by banks.

Congressmen and analysts are concerned about what would be the ultimate cost of the measure and its impact on the budget deficit, the outlook for the dollar and inflation.

Led by Treasury Secretary Henry Paulson, officials are working on a solution to mop up hundreds of billions of dollars worth of bad mortgage debt on the books of financial institutions.

Paulson, Bernanke, Securities and Exchange Commission Chairman Christopher Cox and James Lockhart, director of the Federal Housing Finance Agency, are due to testify before the Senate Banking Committee starting at 9:30 a.m. EDT.

(Editing by Kenneth Barry)