By Steve Goldstein, MarketWatch
LONDON (MarketWatch) -- U.S. stock futures dropped Wednesday, the first day of the hastily-drawn-up German short-sale ban, which served to reinforce rather than dispel worries over the health of European governments and the lenders that possess their debt.
S&P 500 futures fell 13.7 points to 1,105.00 and Nasdaq 100 futures dropped 22.5 points to 1,865.50. Futures on the Dow Jones Industrial Average lost 110 points.
U.S. stocks slumped Tuesday after news of the German short-sale ban, which bans naked short sales of 10 financials and euro-zone government bonds. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all lost between 1.1% and 1.6%.
The German ban started Wednesday morning. Credit-default swaps of euro-zone nations tightened as speculators substituted the euro for their bets against Europe's fiscal health.
The euro /quotes/comstock/21o!x:seurusd (CUR_EURUSD 1.2181, -0.0002, -0.0164%) fell below $1.22, a new four-year low, and the inflows into the dollar hit commodities, as platinum futures slumped $72 an ounce.
Gold futures fell a more modest $7 an ounce, reflecting its safe-haven appeal.
Crude oil futures also declined, losing $1.31 to $68.10 a barrel. Stocks in Europe dropped sharply, particularly financials like Barclays /quotes/comstock/13*!bcs/quotes/nls/bcs (BCS 17.19, -0.54, -3.05%) that aren't subject to the ban, while losses for German financials including Deutsche Bank /quotes/comstock/13*!db/quotes/nls/db (DB 59.14, -2.10, -3.43%) were limited to 2%. Asian equities also lost ground.
Speaking after the ban was enacted, German Chancellor Angela Merkel on Wednesday said "a failure of the euro means a failure of Europe."
The German move was sharply criticized by market participants, notably the uncoordinated and sudden implementation, as traders feared for broader implementation.
"We expect a period of ongoing retrenchment and perhaps consolidation while markets look to re-price risk and arrive at valuations that better reflect near-term risks to economic and earnings growth coming from China tightening, European austerity programs, a weak euro and banking reform stateside," said John Stoltzfun, a strategist at Ticoderoga Securities.
Outside of the German move, CPI data due at 8:30 a.m. Eastern will be a focus.
Hewlett-Packard /quotes/comstock/13*!hpq/quotes/nls/hpq (HPQ 46.79, -0.73, -1.54%) may be active after the computer giant reported a 28% profit rise.
"HP posted strong first-quarter earnings on Wednesday as pent-up demand for its technologies fueled revenue and earnings growth," said Michael Holt, an analyst at Morningstar. "The results reaffirm our belief that HP is positioned for success across the hardware, printing, and service sectors."
Discounter Target /quotes/comstock/13*!tgt/quotes/nls/tgt (TGT 54.22, -1.66, -2.97%) also will be in the spotlight following the profit growth but same-store sales decline reported by Wal-Mart Stores /quotes/comstock/13*!wmt/quotes/nls/wmt (WMT 53.71, +0.98, +1.85%) on Tuesday.
Steve Goldstein is MarketWatch's London bureau chief.