U.S. stock index futures added to sharp losses Monday amid worries that Spain will need a full sovereign bailout and mounting fears that Greece may leave the euro.
A number of regional governments in Spainare set to ask Madrid for financial support. Spanish bonds yields surged to their highest levels since the euro was created.
More bad news came from figures showing Spain's economy contracted 0.4 percent in the second quarter, heightening fears that the country will require a full-scale bailout rather than the “bailout-lite” which has been put forward.
Euro zone finance ministers approved terms for a loan of up to 100 billion euros for Madrid to recapitalize its banks last week.
Concerns over Greece also returned amid worries that the IMF may no longer provide financial aid to the debt-ridden nation, according to a report in Germany's Der Spiegel, sparking fears the country could run out of money as early as September. And Greece's Prime Minister Antonis Samaras warned that the country was facing a new “Great Depression.”
European shares plungedand the euro hit a new two-year low against the dollar.
Financials, one of the most sensitive sectors to Europe, slumped heavily. Shares of GoldmanSachs, JPMorgan, Citigroup and Morgan Stanley were all trading lower.
Among earnings, McDonald's dropped after the fast-food giant reported quarterly results that missed expectations.
Halliburton edged higher after the oilfield services company posted a better-than-expected profit, thanks to higher international drilling activity.
And Hasbro gained after the toymaker reported better-than-expected earnings on better inventory management and market share gains.
Texas Instruments and Baidu are slated to report earnings after the closing bell.
On the M&A front, GenOn Energy surged after NRG Energy said it will buy the power producer for $1.7 billion in stock.
And Canada's Nexen skyrocketed after China's oil producer CNOOC agreed to buy the company in a deal worth about $15 billion.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
MONDAY: Earnings from Baidu, Texas Instruments
TUESDAY: FHFA home price index, Richmond Fed manufacturing index, 2-yr note auction; Earnings from AT&T, DuPont, UPS, UnderArmour, AK Steel, Apple, Aflac, Broadcom
WEDNESDAY: Weekly mortgage apps, new home sales, oil inventories, 5-yr note auction, USDA food prices outlook; Earnings from Arcelor Mittal, Boeing, Bristol-Myers, Caterpillar, ConocoPhillips, Ford, GlaxoSmithKline, PepsiCo, Visa, Symantec, Western Digital, WholeFoods, Zynga
THURSDAY: Durable goods orders, jobless claims, pending home sales, 7-yr note auction, CFTC emergency meeting; Earnings from AstraZeneca, ExxonMobil, 3M, Credit Suisse, Dow Chemical, Pulte, Sprint, Amazon.com, Amgen, Facebook, Expedia, Starbucks
FRIDAY: GDP, consumer sentiment, summer Olympics start, 100 days to election; Earnings from Chevron, Merck, Barclays, DR Horton
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