Indications: U.S. futures fall further on Portugal warning

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By Steve Goldstein & Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- U.S. stock futures turned lower Wednesday after the previous session's battering on further worries over the health of the euro zone, with Moody's Investor Service warning Portugal could be downgraded again.

Marginally higher early in the morning, futures for the major indexes slid as the early hours progressed, falling further after the ADP report found private U.S. employers added 32,000 jobs in April.

"As has been seen from the initial claims data, net firings have ended but the pace of hiring, while improved, still remains muted. Friday's government payroll report will include public sector census workers and the estimated total job gain is 189,000, 100,000 of which is expected to be private sector jobs," wrote Peter Boockvar, equity strategist at Miller Tabak.

S&P 500 futures fell 5.3 points to 1,167.1 and Nasdaq 100 futures fell 9.5 points to 1,960. Futures on the Dow Jones Industrial Average fell 50 points to 10,842.

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U.S. stocks tumbled Tuesday in heavy trade, with the Dow Jones Industrial Average sliding 225 points and the Nasdaq Composite and S&P 500 all battered as well.

The Dow Jones U.S. Total market Index suffered a market capitalization drop of $363 billion in the biggest one-day drop since Feb. 4. Worries that Greece's fiscal woes would extend to Spain and Portugal helped puncture markets, and data showing slowing Chinese growth also contributed to the slide.

Those worries were underpinned on Wednesday when Moody's said it could cut Portugal's Aa2 ratings by one or at most two notches. Moody's believes risk discrimination in the financial markets may raise Portugal's financing costs for some time to come. Portugal's PSI 20 index /quotes/comstock/30t!i:psi20 (XX:PSI20 6,941, -157.07, -2.21%) fell 2.3%. See Moody's warns on Portugal

Strategists at Credit Suisse say the euro /quotes/comstock/21o!x:seurusd (CUR_EURUSD 1.2860, -0.0113, -0.8710%) , which fell to one-year lows on Tuesday, could fall to the $1.20 to $1.25 range. The euro was trading below $1.30 on Wednesday, and Spain's IBEX 35 /quotes/comstock/20r!iib (XX:IBEX 9,618, -241.10, -2.45%) dropped 2.5% to extend the Madrid index's nosedive from Tuesday. Greece held a nation-wide strike in a bid to prevent the budget cuts demanded by the European Union and the International Monetary Fund.

"We see a very clear risk that the European Central Bank will expand their balance sheet while the Fed is contracting theirs," the strategists said.

There's more economic ahead, with the Institute for Supply Management's nonmanufacturing index offering data after Wall Street's start.

Of companies in the spotlight, American International Group /quotes/comstock/13*!aig/quotes/nls/aig (AIG 38.25, -1.29, -3.26%) fell 1.8% after Britain's Prudential /quotes/comstock/13*!puk/quotes/nls/puk (PUK 16.88, -0.76, -4.31%) delayed the sale of $20 billion worth of stock as it sought regulatory clearance for a deal to buy AIG's Asia unit AIA in a $35.5 billion acquisition.

Earnings season continues as Time Warner /quotes/comstock/13*!twx/quotes/nls/twx (TWX 32.67, -1.21, -3.57%) rose 1.8% after reporting better-than-forecast first-quarter earnings, while News Corp. /quotes/comstock/15*!nwsa/quotes/nls/nwsa (NWSA 15.40, -0.64, -3.99%) , the publisher of this report, fell 3% after reporting a declining profit and warning lower film revenue will hit current quarter earnings.

InterMune /quotes/comstock/15*!itmn/quotes/nls/itmn (ITMN 45.44, -2.60, -5.41%) plunged 77% after the biotech was unable to win U.S. approval for a lung treatment.

Oil futures dropped $1.67 a barrel, and gold futures reversed earlier losses to turn $5 higher.

Asian stocks dropped sharply on the euro-zone travails.

Steve Goldstein is MarketWatch's London bureau chief. Kate Gibson is a reporter for MarketWatch, based in New York.