Futures declined sharply Wednesday as a spike in Italian bond yields to a euro era record spooked investors and amid uncertainty whether a new government in Italy can tackle the nation's debt crisis.
Italian borrowing costs reached a breaking point, hitting 7.5 percent, a level that previously drove other euro zone nations such as Greece and Portugal out of credit markets and forced those countries to seek bailouts from external assistance from the EU and IMF. However, most strategists worry that Italy is too large to bail out.
Stocks closed higher in the previous session after Italian Prime Minister Silvio Berlusconi announced he would resign once a series of austerity measures had been put in place.
Elsewhere a plan for former European Central Bank vice-president Lucas Papademos to lead a Greek government of national unity also ran run into trouble, according to sources, prolonging a political hiatus as that country heads toward bankruptcy.
Christine Lagarde, head of the IMF, warned Europe's debt crisis risked plunging the global economy into a "lost decade,"and said it was up to rich nations to shoulder the burden of restoring growth and confidence.
On the earnings front, GM posted a better-than-expected profitas the automaker gained market share in North American and Asian markets. However, shares tumbled with the broader market.
Macy's reported results that beat estimates and also raised its full-year outlook.