Futures pared losses Friday after a pair of better-than-expected manufacturing readings.
But dismal economic data out of Europe and weak U.S. retail reports kept futures in the red.
"There are very ominous signs when you take apart the Dow Jones Industrial Average and S&P," J.J. Burns, president of J.J. Burns & Company said. "We're petering out."
A gauge of manufacturing in New York State showed the industry's pace of contraction slowedin May, the the New York Federal Reserve reported. And industrial production fell 0.5 percent in April, the slowest pace in six months.
And consumer prices were unchanged in April, as expected, but recorded their largest 12-month drop since 1955, as sluggish consumer demand limited companies' pricing power.
Clothing retailer Ambercrombie & Fitch reported a loss of 31 cents a share, worse than estimates and enough to send shares lower by 7.7 percent premarket.
Fellow retailer JCPenney also disappointed the market, posting earnings of 11 cents per share that actually were a shade above Wall Street expectations. But the company lowered its guidance for the year ahead and JCPenney shares tumbled more than 6 percent premarket.
The dollar gained against the euro after growth domestic product data out of several countries showed Europe fell deeper into recessionin the first quarter. Germany's economy sank 3.8 percent, while France's dipped 1.2 percent in the first quarter.
"Fear and greed (have) a huge part to play right now with everyone desperate to call the bottom of the market but absolutely terrified that these so-called green shoots will quickly turn into dead weeds," said Andrew Turnbull, senior sales manager at ODL Securities told Reuters.
Still to come: April industrial production and capacity utilization data are due out at 9:15 am and Dallas Federal Reserve President Fisher will talk in San Antonia, Texas about the economic outlook. At 9:55 am May preliminary results for consumer sentiment in the U.S. is due.
The move lower for futures comes despite help for shares of insurers that will benefit from government bailout funds. The major indexes were indicating a drop of about 1 percent for the major indexes.
CNBC learned that six insurers, Hartford Financial , Prudential Financial , Lincoln National , Principal Financial Group , Allstate and Ameriprise , secured the green light from the Treasury Department to receive funds under the Troubled Assets Relief Program (TARP).
"Insurance companies are in a whole lot of trouble," Burns said. He adds that the insurers getting access to TARP is an "ominous signal".
Yet Hartford shares rose more than 8 percent in premarket trading. Prudential was up 2.6 percent, Lincoln National by 5.7 percent, Principal by 5.3 percent and Allstate by 3 percent.
Corporate attention will be on General Motors on Friday, with the possibility of more volatility in the auto sector. The automaker is expected to reveal more information on whether it will file for Chapter 11 bankruptcy.
Investors piled into basic resources after hearing that Rio Tinto remains committed to a $19.5 billion tie-up with Asian state-owned miner Chinalco. The sector was up over 3 percent on the DJ Stoxx 60 index.
The banking sector also got a boost on Friday on reports that Britain's Barclays is considering the sale of its asset management unit, Barclays Global Investors for about $10 billion. The Financial Times reported Blackrock was among one of the potential bidders for BGI.