Dow futures tumble as Europe tanks; 10-year breaks below 1.6%

U.S. stock index futures indicated a sharply lower open on Thursday as traders reacted to a sharp fall in European stocks and looked ahead to the second day of Fed Chair Janet Yellen's testimony in Washington.

Dow futures were indicating a drop of around 250 points in premarket trading, after falling more than 300 points. The pan-European Stoxx 600 index was down by more than 2.8 percent.

Meanwhile, U.S. Treasurys soared, as the 10-year yield fell to 1.59 percent.

On Wednesday Yellen told the House Financial Services Committee that the Fed was not sure it could legally take rates negative as Europe and Japan have. She also said it was unlikely the Fed would cut rates, having just raised them.

On Thursday, she will speak before the U.S. Senate's Committee on Banking, Housing, and Urban Affairs, at 10 a.m. ET. On the data front, weekly jobless claim came in at 269,000, below expectations.

In Asia, the Hang Seng index in Hong Kong – which resumed trading after being closed for the Lunar New Year holiday – closed down 3.85 percent. In Japan the Nikkei was closed for National Foundation Day, while markets remained closed in mainland China.

In oil markets, Brent crude traded at around $30.20 a barrel on Thursday morning, down by 2 percent, while U.S. crude was at around $26.80 a barrel, down by 2.6 percent.

On the earnings front, PepsiCo and Time Inc., among others, reported before the bell. AIG, Activision Blizzard and CBS are among companies set to report after the bell.

—CNBC's Patti Domm contributed to this report