U.S. stock index futures are heading sharply higher after a failed attempt to rally from the Dow's worst 3-day point decline in history and the loss of $900B in the S&P 500 over the last two sessions. Traders keep finding it difficult to know where to turn, with global indices flipping wildly between gains and losses. Wednesday's markets are expected to take their cue from the action in China again, but there will also be plenty of speculation about the Fed and when it might raise rates. U.S. Futures: Dow +1.3%; S&P 500 +1.3%; Nasdaq +1.2%

Economy

Chinese shares zig-zagged in volatile trade again today as investors digested the effect of a fresh rate cut by the PBOC (its fifth since last November) and the lowering of its reserve requirement ratio. The Shanghai Composite Index fell 1.3% to 2,927.29 at the close, despite a new $22B injection from Beijing to shore up growth. Chinese equities have now extended their steepest five-day drop since 1996, losing half their value, or $5T, since mid-June. Shares elsewhere in Asia ended mixed; European stocks are deep in the red.

Due to "turmoil in the global markets," Puerto Rico has decided not to go ahead with a controversial proposal to borrow $750M for improvements to its water and sewer authority. The government also seemed to decide it could not borrow the money at an affordable interest rate. Investors seemed taken aback by the move, which aimed to sell new bonds while telling the U.S. Supreme Court it had to restructure its old debt.

Along with several other FOMC members, Fed Chair Janet Yellen is planning to skip the annual gathering of monetary policymakers in Jackson Hole this year, marking the second time in three years the Fed's top official won’t be traveling to Wyoming. Yellen's predecessor, Ben Bernanke, skipped the 2013 gathering. The topic for the Aug. 27-29 conference will be inflation dynamics and monetary policy.

South Korea is willing to discuss North Korea's demand for an end to sanctions, and is preparing a new channel of dialogue with the North, just a day after the rivals struck a landmark pact that defused a standoff between their forces. Tuesday's accord saw North Korea express regret over a landmine incident that wounded South Korean soldiers and the South agree to stop broadcasting anti-North propaganda over border loudspeakers. South Korea's KOSPI Index closed up 2.6% on the news.

In the latest escalation of Yemen’s five-month war, Houthi rebels said they've fired a Scud missile into Saudi Arabia while a Saudi official acknowledged sending forces into northern Yemen in a bid to stop border attacks. A Saudi-led coalition recently stepped up its ground offensive after months of airstrikes against the Houthis, who seized the Yemeni capital Sana'a in September and forced President Abdurabuh Mansur Hadi’s government to flee to neighboring Saudi Arabia.

Stocks

Schlumberger is acquiring oilfield equipment maker Cameron International (NYSE:CAM) in a stock and cash transaction valued at $14.8B. Under the terms of the agreement, Cameron shareholders will receive 0.716 shares of Schlumberger (NYSE:SLB) common stock and a cash payment of $14.44 for each share held. The deal represents a 56.3% premium to Cameron's closing stock price on Tuesday. CAM +41.4% premarket.

Despite Schlumberger's new announcement, the recent market selloff and plunging oil prices are increasing fears that some of this year’s largest takeover deals are at risk of falling apart, including Shell's (RDS.A, RDS.B) $70B offer for BG Group (OTCQX:BRGYY) and Halliburton's (NYSE:HAL) $35B bid for Baker Hughes (NYSE:BHI). Over the past week, the gap between the agreed price of several takeovers and the market price of the target companies' shares has widened, which usually is interpreted as a signal of declining confidence that the transaction will be completed as planned.

Transocean is looking to cancel the third and fourth installments of its dollar-denominated dividend this year and is also seeking a par value reduction of its shares to address expected capital losses. "In light of the deterioration of the offshore drilling market and concerns regarding the timing of the market's recovery," Transocean (NYSE:RIG) may recognize an aggregate loss associated with related non-cash impairments in excess of 2B Swiss francs. RIG -6.3% premarket.

Laying out plans for future U.S. products, Fiat Chrysler (NYSE:FCAU) Chief Sergio Marchionne presented blueprints of a new plug-in minivan, an updated Dodge Charger and new Jeep SUVs for thousands of dealers attending a meeting in Las Vegas on Tuesday. Marchionne, who took control of Chrysler after its 2009 bankruptcy, recently made headlines with offers for industry consolidation and several major recalls.

Toyota is beginning trial production of cars at the China plants that were shut following the recent explosions in Tianjin, the first step in reopening the facilities following a two-week closure. The blasts killed at least 123 people and injured 67 Toyota (NYSE:TM) workers living in the area. About 4,700 Toyota and Lexus vehicles were also damaged.

Amazon will begin delivering wine, beer and spirits to U.S. customers for the first time through its Prime Now program, adding a fresh twist to on-demand delivery starting in the Seattle area. The move will continue testing the online alcohol delivery market, which is estimated to increase to $1.4B in sales by 2020, according to IBISWorld. Amazon (NASDAQ:AMZN) already provides quick alcohol delivery in London and offers wine sales across the U.S.

Snapchat has finally hired someone to run its finances - Drew Vollero, a former finance executive at toy maker Mattel (NASDAQ:MAT). Vollero will report to Chief Strategy Officer Imran Khan, and will be tasked with building the company's finance department and preparing an initial public offering. Snapchat, which was valued at $16B by investors earlier this year, is used by about 100M people daily.

The U.S. Army and Marine Corps. have chosen Oshkosh Defense (NYSE:OSK) for a $6.75B contract to start light production of a replacement for the aging Humvee. Oshkosh was considered the favorite for the pact vs. AM General, the privately held maker of the original Humvee, and Lockheed Martin (NYSE:LMT), which has less experience building military ground transport. The contract covers 17,000 Joint Light Tactical Vehicles. OSK +11.6% premarket.

Mylan shareholders are set to vote on Friday on whether the company should move forward with a $35.1B hostile bid for Perrigo (NYSE:PRGO), whose value has declined with the recent market meltdown. If more than half vote "yes," Mylan plans to take its cash and stock offer directly to Perrigo shareholders. "I don't believe they're going to get their threshold," Perrigo CEO Joseph Papa said in a telephone interview. MYL -0.2% premarket.

Creating one of the world's largest online betting and gaming groups, Betfair (OTC:BTFRF) and Irish rival Paddy Power (OTC:PDYPF) have reached an agreement in principle on a £5B ($7.85 billion) merger. The deal is the latest in a flurry of M&A activity in the industry, which is expected to accelerate as gambling firms look to protect themselves from increasing tax and regulatory pressures.

Tuesday's Key Earnings
Best Buy (NYSE:BBY) +12.6% after comparable-sales topped expectations

Today's Markets

In Asia, Japan +3.2% to 18377. Hong Kong -1.5% to 21080. China -1.3% to 2927. India -1.2% to 25715.
In Europe, at midday, London -1%. Paris -0.9%. Frankfurt -0.7%.
Futures at 6:20, Dow +1.3%. S&P +1.3%. Nasdaq +1.2%. Crude +0.1% to $39.34. Gold -0.3% to $1134.60.
Ten-year Treasury Yield -5 bps to 2.08%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Durable Goods
10:30 EIA Petroleum Inventories
11:30 Results of $13B, 2-Year FRN Auction
1:00 PM Results of $35B, 5-Year Note Auction