Stocks futures drop on euro zone fears

NEW YORK (Reuters) - Stock index futures dropped on Wednesday, as rising bond yields for Italy and Spain indicated worsening fears about a spiraling of the euro zone's debt crisis.

Yields on 10-year Spanish bonds moved closer to the 7 percent level which forced other nations in the bloc to seek a bailout and seen as unsustainable by many analysts.

Spain is expected to issue new bonds shortly in an effort to fund its troubled banks despite the increased borrowing costs.

Adding to the concern, Italian 10-year yields topped 6 percent for the first time since January at a bond sale, raising concerns the region is vulnerable to a contagion.

The region's fiscal woes sent the euro to its lowest level in 23 months against the dollar. U.S. equities have been closely tethered to the currency's fortunes, with a 50-day correlation between the euro and the S&P 500 index at 0.91.

Futures briefly cut losses and the euro bounced after the European Commission said the euro zone should move toward a banking union, consider eurobonds and the direct recapitalization of banks from its permanent bailout fund as well as boost growth and cut debt.

S&P 500 futures fell 9.7 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures dropped 97 points, and Nasdaq 100 futures lost 19.5 points.

Economic data expected includes pending home sales for April. Economists in a Reuters survey expect a 0.1 percent rise compared with a 4.1 percent rise in the previous month.

Research In Motion Ltd dropped 7.4 percent to $10.40 in premarket trade as the company hired bankers for a far-reaching strategic review and to look for partnerships as the BlackBerry-maker warned it would likely report a shock fiscal first-quarter operating loss.

Apple Inc Chief Executive Tim Cook said technology for televisions was of "intense interest" but stressed the company's efforts would unfold gradually amid speculation the iPad and iPhone maker was on the brink of unveiling a revolutionary iTV.

Stanley Black & Decker Inc is among potential bidders for private equity-owned Infastech, a Singapore-based industrial fastener maker with revenues of more than $500 million, sources with direct knowledge of the matter said.

European shares headed for a third straight month of losses on Wednesday, hit by concern over Spain's struggling banks and the country's rising borrowing costs, with charts pointing to more gloom ahead. <.EU>

Asian shares slipped as fears about Spain while signs emerged that China may take a cautious stance on economic stimulus.

(Reporting By Chuck Mikolajczak, editing by Dave Zimmerman)

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