Futures extended their sharp losses Thursday after a gloomy forecast on global growth, continuing worries about the European debt crisis and following news that jobless claims rose more than expected last week.
Morgan Stanley warned the global economy was "dangerously close to a recession" and revised their 2011 global growth forecast down to 3.9 percent from 4.2 percent and 2012 forecast to 3.8 percent from 4.5 percent.
“While we had been calling for a 'BBB' recovery in developed markets all along, the path now looks even more bumpy, below-par and Brittle than previously thought," Morgan Stanley said in a note, adding that emerging markets were no longer immune.
In addition, stocks were also under pressure following reports that the U.S. federal and state regulators were intensifying their scrutiny of the U.S. arms of Europe's biggest banks, according to the Wall Street Journal.
European markets tumbledfollowing both announcements, led by financials. Shares of Deutsche Bank and Barclays fell sharply.
Gold surged near its record highs above $1,800 an ounce, helped by the unease over the lack of a solution to the European debt crisis and sluggish growth in the developed world. Meanwhile, oil prices tumbled sharply.
On the economic front, the number of people applying for unemployment benefits jumped 9,000 to a seasonally adjusted 408,000, the highest in four weeks, according to the Labor Department.
Meanwhile, the Consumer Price Index gained 0.5 percent in July, according to the Labor Department, amid higher gas prices last month. The core index, which excludes volatile food and energy, rose 0.2 percent.