Stock futures drop on gloomy euro-zone growth view

MADRID (MarketWatch) — U.S. stock futures turned lower on Tuesday after revised European Commission figures showed gloomier growth forecasts for the region, and as investors awaited a survey on U.S. nonmanufacturing growth and more speeches from Federal Reserve members.

On the corporate side, AOL Inc. rose in premarket after results, while LeapFrog Enterprises Inc. slid after a downbeat revenue outlook.

Futures for the Dow Jones Industrial Average (DJZ3)  fell 49 points, or 0.3%, to 15,527, while those for the Standard & Poor's 500 index (SPZ3)  slipped 4.8 points, or 0.3%, to 1,758.20. Futures for the Nasdaq 100 index (NDZ3)  lost 11 points or 0.3%, to 3,366.50.

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On the calendar for U.S. investors on Tuesday, the Institute for Supply Management's nonmanufacturing index for October is due at 10 a.m. Eastern Time. Economists polled by MarketWatch are calling for the index to fall to 54% versus 54.4% in the prior month.

Two Fed speakers who are not voting members of the central bank's policy-setting meeting are scheduled to talk. Richmond Fed President Jeffrey Lacker is due to give a speech in Charlotte, N.C. on workforce development at 1:15 p.m. Eastern. Later, San Francisco Fed President John Williams will speak to reporters during the bank's Asia Economic Policy Conference at 5 p.m. Eastern.

But it was all about Europe in the premarket. European stocks fell, with stock futures and the dollar index following south, after the European Commission cut its forecasts for economic growth and unemployment in the euro zone. Growth is now seen at 1.1% in 2014, versus a prior expectation of 1.2%, and unemployment is seen rising to 12.2% versus a previous forecast of 12.1%.

The Commission forecasts gave investors a chance to take some gains off the books, said Joshua Mahony, research analyst at Alpari U.K. "In terms of the euro-zone picture, what you're looking at really is the fact that people have bought into this recent rally a bit too much. It was a bit overbought in the first place."

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The European Central Bank will meet on Thursday, and there has been some speculation that a rate cut could be coming after poor inflation figures last week. Mahony said it's not immediately clear how the Commission's outlook could affect that meeting. "[Europe] rates are going to go down, but it remains to be seen whether bad news is bad news."

While European stocks have been trading at five-year highs, the S&P 500 index (SPX) is also tapped to potentially finish 2013 with the biggest annual increase in 16 years. Plenty of market watchers have been getting nervous that Wall Street's gains are getting stretchy.

Keith R. McCullough, chief executive officer of Hedgeye Risk Management, said markets are overreacting to the Europe data. "People are once again freaking out about the wrong thing — Europe seeing a deflation of the inflation plus growth accelerating (U.K. Services PMI hit a 16-year high this morning) is very good for Europe. USA loses with down dollar on that, which is why we call our Q4 macro theme #eurobulls. On the margin, Europe has the stronger currencies and growth momentum now," he said in emailed comments.

The dollar index (DXY)  recovered somewhat from its initial hit on the EU data, but the British pound remained the stronger of its dollar cross (GBPUSD) , jumping to trade at over $1.60 after the Markit/CIPS U.K. Services PMI for October showed the biggest rise in activity in more than 16 years.

In other markets, gold was off, along with crude prices.

Reporting ahead of the opening bell include AOL Inc. (AOL) said third-quarter profit dropped 90% on costs of restructuring and write-downs related to its Patch local news operations. But shares rose 4% in premarket trading after revenue beat forecasts with a 14% rise to $386 million.

CVS Caremark Corp. (CVS)  shares rose 2.5% in premarket trading after the company said profit rose to $1.02 a share, from 79 cents a share. The firm increased and narrowed its outlook for the 2013 fiscal year, projecting a range of $3.98 to $4.01 per share, including gains from a legal settlement.

Shares of LeapFrog Enterprises (LF)  slid 8% in premarket trading after the interactive toy maker issued a more cautious revenue outlook for 2013, citing fewer days between Thanksgiving and Christmas and a weak environment for retailers.