Israel continued to pound targets in Gaza from the air on Monday even as it made final preparations for a ground assault. The Israeli military offensive began on Dec. 27, after the lapse of a six-month-long de facto cease-fire between Israel and the government of the Palestinian militant group Hamas. Israel says its operation will continue until Hamas stops firing rockets at Israeli towns along the border with Gaza. Hamas wants an end to the economic chokehold Israel has applied to the crowded Mediterranean territory.

Relations between the nuclear-armed neighbors have deteriorated after India blamed Islamist militants based in Pakistan for the last month's attacks on Mumbai that killed 179 people.

In a sign of mounting tension, Pakistan has canceled army leave and shifted some troops from its western border with Afghanistan to the eastern border with India.

Pakistan has condemned the Mumbai attacks and has denied any state role, blaming "non-state actors."

President Asif Ali Zardari, speaking at ceremony to mark the first anniversary of the assassination of his wife, former prime minister Benazir Bhutto, said dialogue was the best way forward.

The U.S. market's most tracked benchmark, the S&P 500, is down 40.6 percent since last year's close with only three trading days left in 2008. Given the market's hair-trigger volatility this year, that is just one bad day away from surpassing 1931's drop of 47.1 percent -- the biggest yearly decline ever.