By Anora Mahmudova and Barbara Kollmeyer, MarketWatch

U.S. trade deficit narrows to $41.5 billion in June

NEW YORK (MarketWatch) -- U.S. stock futures continued on a downward path as failed merger news, geopolitical tensions and downbeat European economic news weighed on sentiment ahead of the market open on Wall Street.

The U.S. trade deficit shrank in June by more than expected, but investor reaction was muted.

Futures for the Dow Jones Industrial Average (DJU4) fell 60 points, or 0.4%, to 16,306, while those for the S&P 500 index (SPU4) eased 8 points, or 0.4%, to 1,905. Futures for the Nasdaq-100 index (NDU4) tumbled 23 points, or 0.6%, to 3,849.

In today's sole economic news, the U.S. trade deficit shrank in June, largely because imports of petroleum fell to the lowest level since late 2010.

Meanwhile, Dallas Federal Reserve President Richard Fisher said after the close of Wall Street's session that the central bank may need to hike rates sooner than expected, if data continues to be as strong as the July Institute for Supply Management's service-sector index. The index reached the highest level since Dec. 2005 on Tuesday.

Also read: Here is when Fed officials forecast an interest-rate hike

European tension

Europe's economy may provide extra tension for Wall Street on Wednesday. Stock futures pushed into the red after news that Italy unexpectedly fell back into recession in the second quarter.

Already rattled by Russia-Ukraine fears, the Stoxx 600 index fell 1.4%, while stocks in Italy sank 3%. Other data showed German manufacturing orders dropping a surprising 3.2% in June on an adjusted basis, as geopolitical worries held back orders. The German DAX 30 index dropped 1.5%.

Investor sentiment was already dented by Tuesday's selling action on Wall Street, driven by reports that Russia has dramatically lifted the number of troops and vehicles on its border with Ukraine in the past few days. On Wednesday, Poland's prime minister said the risk of an invasion has intensified.

In addition, Russian President Vladimir Putin told his government to prepare retaliatory measures against sanctions by the U.S. and Europe. The DJIA closed down 0.8%, or 139.81 points, to 16,429.47, while the S&P 500 (SPX) dropped 1%, to 1,920.21, on Tuesday.

"With the Dow Jones brushing the 200-day moving average for the first time since the end of January, there will be a lot of nervous bulls out there," said Chris Beauchamp, market analyst at IG, in a note. (Read more on why stocks are down in Wednesday's Need to Know http://www.marketwatch.com/story/walgreen-to-buy-remaining-stake-in-alliance-boots-2014-08-06-61035145.)

Jitters carried over into Asia, where the Nikkei 225 index slid 1%. In other markets, Gold prices (GCU4) remained firm, while oil (CLU4) held steady ahead of inventory reports due later, and the dollar traded choppy.

Groupon, Time Warner, Sprint on the move

Shares of Groupon (GRPN) slid 16% in premarket after the daily-deals company posted disappointing results late Tuesday. Groupon may not be bargain stock it seems

Meanwhile, Time Warner Inc. (TWX) shares sank after 21st Century Fox Inc. (NWSA) said late Tuesday that it was yanking its proposal to buy the company. And Sprint (S) shares sank after it ended its pursuit of T-Mobile US Inc. (TMUS) and would replace Chief Executive Dan Hesse with billionaire entrepreneur Marcelo Claure, who is untested as a wireless operator, The Wall Street Journal reported. Sprint shares slid 17%.

And shares of Walgreen Co.(WAG) fell 15% after the company said it will buy the remaining 55% of Alliance Boots GmbH that it doesn't already own. The drugstore also said it will keep headquarters in the U.S., news that will disappoint a group of investors trying to persuade the company to relocate its headquarters to tax-friendly Switzerland. Read about more notable stock moves here.

More must-reads from MarketWatch:

The U.S. pump-and-dump

How you'll know if it's time for a market crash

Preparing for a Fed change of heart

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(END) Dow Jones Newswires

August 06, 2014 08:59 ET (12:59 GMT)

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