Futures Sink; S&P: U.S. Outlook to Negative

Stock index futures fell further after news the ratings outlook for the United States was revised to "negative" by Standard & Poor's, although the rating agency affirmed the nation's triple-A ratings.

The revised outlook reflects the U.S.'s "very large budget deficits and rising government indebtedness" relative to its triple-A peers. "The path to addressing these is not clear to us," S&P said.

"We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns," S&P said.

Futures had been down about a half a percent before the S&P news hit, and are now trading down more than 1.2 percent across-the-board.

Citigroupposted a profit of 10 cents per share, a penny ahead of estimates, but net income fell, and the bank said it continues to struggle in terms of growth. Shares edged higher in premarket trading.

Meanwhile, oil prices droppedafter a lack of buyers for crude prompted Saudia Arabia to cut its output. London Brent crude traded below $123 a barrel, while U.S. light crude fell below $109.

Elsewhere in earnings, Eli Lilly reported profit of 95 cents per share, beating analyst estimtaes and sending shares of the Illinois drugmaker up 1.6 percent in premarket trading.

Halliburton also reported sharply higher earnings on increased activity in North American oil fields that offset Middle East unrest. Its shares also rose 1.6 percent premarket.

Texas Instruments also is due to report after the market closes.

Expectations for earnings were hurt last week as

Bank of America



kicked off the earnings season with worse than expected results.



Johnson & Johnson

are also expected to report earnings for the first quarter later this week.

Healthcare stocks were expected to be in the spotlight after Swiss medical device makerSynthesconfirmed it is in merger talks with Johnson & Johnson in a deal which could be worth $20 billion.

Gap fell sharply in pre-market trading after news Goldman Sachs downgraded the retailer to "sell" from "neutral," saying their large size represents a "structural hurdle." Bank of America Merrill Lynch downgraded Gap to "neutral" from "buy."

Meanwhile, economic data from the Census Bureau of the Department of Commerce due out at 8:30 am New York time was expected to show a small increase in the construction of residential properties for March, to 500,000 units from 479,000 in February, according to Briefing.com

Elsewhere, China hiked bank reserve requirements to 20 percent on Monday in an effort to combat continuing rising inflation. The increase in reserve requirements is the fourth rise this year.

In Europe, Greece tried to fend off accusations that it would need to restructure its debts but failed to convince investors. Bank stocks such as Societe Generale and BBVA fell on continued concern about Greek debt.

And Dutch consumer electronics group Phillips announced it was divesting its loss makingtelevision business blaming this part of the business for dragging down profits.

On Tap Next Week:

MONDAY: Housing market index, Eli Lilly shareholders meeting, taxes due; earnings from Citigroup, Eli Lilly before-the-bell and Texas Instruments after-the-bell.
TUESDAY: Housing starts, Fifth Third shareholders meeting, Moody's shareholders meeting, BlackBerry Tablet launches; earnings from Goldman Sachs and Johnson & Johnson before-the-bell, and IBM, Intel, Yahoo after-the-bell.
WEDNESDAY: Weekly mortgage applications, existing home sales, oil inventories; earnings from Abbott Labs, AT&T, United Tech and Wells Fargo before-the-bell and AmEx, Amgen, Apple, Qualcomm, Yum Brands after-the-bell.
THURSDAY: Weekly jobless claims, Philadelphia Fed survey, leading indicators, money supply, Citgroup shareholders meeting; earnings from DuPont, GE, McDonald's, Morgan Stanley, Travelers and Verizon before-the-bell and Advanced Micro and Capital One after-the-bell.
FRIDAY: Good Friday—All markets closed, banks open.

More on CNBC.com