American stocks headed for a sharply lower open and Treasury bond prices soared today as investors reacted to a stunning reshaping of the landscape of Wall Street. A series of events took out two storied names yesterday: Lehman Brothers Holdings Inc. and Merrill Lynch & Co.

Stocks posted sharp losses in markets across much of the globe as investors absorbed a bankruptcy filing by Lehman and Merrill Lynch’s forced sale to Bank of America for $50 billion in stock. And perhaps most ominously, American International Group Inc. is asking the Federal Reserve for emergency funding. The world’s largest insurance company plans to announce a major restructuring today.

The swift developments are the biggest yet in the 14-month-old credit crises that stems from now toxic subprime mortgage debt.

Investors are worried that trouble at AIG and the bankruptcy filing by Lehman, felled by $60 billion in bad debt and a dearth of investor confidence, will touch off another series of troubles for banks and financial institutions. Wall Street had been hopeful six months ago that the collapse of Bear Stearns would mark the darkest day of the credit crisis.

But many market observers have said for months that a cathartic sell-off is necessary for Wall Street to purge its worries over bad debt and the tight credit conditions that have hobbled the economy. A scare and subsequent sell-off in the markets could establish conditions for a market bottom to form.

Dow Jones industrial average futures fell 372, or 3.3%, to 11,086. Standard & Poor’s 500 index futures fell 48.00, or 3.81%, to 1,210.50. Nasdaq 100 index futures fell 49.25, or 2.8%, to 1,730.25.

Bond prices surged as investors fled to the security of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, plunged to 3.50% from 3.72% late Friday. The dollar was lower against other major currencies, while gold prices rose.

Markets in Tokyo and several other Asian money centers were closed for holidays. In afternoon trading, Britain’s FTSE 100 fell 3.64%, Germany’s DAX index fell 3.33%, and France’s CAC-40 fell 4.37%. The European Central Bank, the Bank of England, and the Swiss central bank stepped in an attempt to calm markets by making more short-term credit available to banks.

Light, sweet crude dropped $4.43 to $96.75 in premarket electronic trading on the New York Mercantile Exchange after damage to Gulf of Mexico oil infrastructure from Hurricane Ike was less than Wall Street feared. Worries about a slower economy have also weighed on oil prices in recent weeks. Oil is down sharply from its mid-July highs when it hit a record over $147 a barrel.

But despite the pullback in oil, prices the gas pump rose above $5 per gallon in some parts of the country yesterday after Ike left some the nation’s refining capacity inoperable.

The reduced headcount of Wall Street firms Monday left Goldman Sachs Group Inc. and Morgan Stanley as the remaining big, independent firms. The two are slated to report quarterly results Tuesday and Wednesday, respectively.

The shake up comes only a week after the government bailed out mortgage lenders Fannie Mae and Freddie Mac and ahead of big economic developments this week. The Federal Reserve is expected to make a decision on interest rates tomorrow. Meanwhile, today Wall Street is also expecting a reading from the New York Fed on regional manufacturing gas well as a report on industrial production.