Indications: U.S. stock futures drop on EU debt, bank legal woe

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By Steve Goldstein, MarketWatch

LONDON (MarketWatch) -- U.S. stock futures pointed to a weaker start Friday ahead of a wave of economic data, with early concerns focused on European debt burden and the legal troubles of the world's top banks.

S&P 500 futures fell 7.2 points to 1,149.60 and Nasdaq 100 futures dropped 11.25 points to 1,936.00. Futures on the Dow Jones Industrial Average fell 59 points.

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Highlights • Iberia narrows net loss on falling fuel costs • EADS net drops 39% on currency hedges • Suspension costs Gartmore $1.8 bln in outflows • China banks' exposure to mortgages buffered • Negative core inflation in Spain spooks stocks

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U.S. stocks lost ground Thursday on reports of widening legal probes of banks, disappointing traffic from retailers and still-elevated jobless claims. The Dow Jones Industrial Average, down six of the last eight sessions, dropped 113 points, the S&P 500 fell 14 points and the Nasdaq Composite fell 30 points.

The lingering debt woes around Europe also have weighed on markets. Data released Friday showed core inflation in Spain turning negative for the first time, raising questions about the country's ability to grow out of its massive debt burden. An alleged threat delivered last week by French President Nicolas Sarkozy to pull his country out of the euro also impacted. See Spain story.

"Four days on from Monday's mega European bailout package the market finds itself pondering the medium-term impact of Europe's massive debt burden," said David Croy, interest rates strategist at ANZ bank in Wellington. See related story.

The euro fell below $1.25 for the first time since March 2009, and Spain's IBEX 35 /quotes/comstock/20r!iib (XX:IBEX 9,622, -356.00, -3.57%) dropped 3.6% in Madrid.

The U.S. sees a busy day for economic releases, with retail sales and industrial production for April, business inventories for March and the University of Michigan's consumer sentiment for May.

Nordstrom /quotes/comstock/13*!jwn/quotes/nls/jwn (JWN 41.29, -1.74, -4.04%) may see pressure after the retailer missed earnings estimates.

Also on the retail front, J.C. Penney /quotes/comstock/13*!jcp/quotes/nls/jcp (JCP 28.17, -1.46, -4.93%) is due to report results.

Sony's outlook paced a negative day for Asia, with the Nikkei 225 closing 1.5% lower in Tokyo.

Gold futures jumped $17.20 to $1,246.40 an ounce, and yields on 10-year Treasury bonds fell 4 basis points to 3.50% as investors sought assets that are perceived to be safer.

Oil futures dropped $1.29 to $73.11 a barrel.

Steve Goldstein is MarketWatch's London bureau chief.