Stocks: Investors rattled by Italy

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NEW YORK (CNNMoney) -- U.S. stocks were headed for another bruising day Tuesday, as fears about the eurozone debt crisis spreading to Italy rattled investors' nerves.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were lower ahead of the opening bell. Futures measure current index values against perceived future performance.

U.S. stocks tumbled Monday, as investors got spooked by worries about how far and deep Europe's debt crisis might spread.

Manoj Ladwa, senior trader at ETX Capital, said contagion fears are likely to stay center stage for investors on Tuesday.

"That's the main concern for the markets," Ladwa said. "Exactly how far this crisis is going to spread."

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The Italy ETF Ishares Msci Italy Index Fund (EWI) fell 2.5% in premarket trading, after sliding 6.2% in the previous trading session.

And the yield on 10-year Italian bonds continued to spike, as investors demand higher interest rates in exchange for holding the country's debt. On Tuesday, yields approached 6% -- an elevated premium over the German bund.

Ladwa said yields will rise even higher if the stress tests scheduled for European banks come back worse than expected, and the Italian 10-year bond could spike above 7% if the country's banks perform poorly.

World markets: European stocks fell in morning trading. Britain's FTSE 100 shed 1.6%, the DAX in Germany retreated 2.0%, and France's CAC 40 stumbled 2.4%.

Asian markets ended the session sharply lower. The Shanghai Composite dropped 1.7%, the Hang Seng in Hong Kong tumbled 3.1% and Japan's Nikkei lost 1.4%.

U.S. Treasuries: Investors have been pouring into U.S. Treasuries as uncertainty surrounding Europe's debt problems grows. Treasuries are considered "safer" havens in times of uncertainty since it's backed by the U.S. government.

The price on the benchmark 10-year note rose, pushing the yield down to 2.87% from 2.92% late Monday.

Currencies and commodities: The dollar hit a nearly four-month high against the euro at $1.39. The greenback also gained against the British pound, but fell versus the Japanese yen.

Oil for August delivery slipped 40 cents to $94.76 a barrel.

Gold futures for August delivery were little changed at $1,549 an ounce.

Economy: The U.S. trade balance figures for May came in at $50.2 billion -- far larger than a revised $43.6 billion in April. The trade deficit was also wider than the $44 billion expected by economists surveyed by Briefing.com.

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In the afternoon, the Federal Reserve's will release the minutes from its Federal Open Market Committee meeting in June.

Companies: After the closing bell Monday, Alcoa (AA, Fortune 500) reported a larger than expected gain in second-quarter sales but investors weren't impressed.

While Alcoa beat on sales, earnings were only in line with recently lowered analyst estimates. Shares slid more than 1% in premarket trading.

Bank shares were also under pressure, with Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500) and Citigroup (C, Fortune 500) all off a little more than 1%. The banking sector is on edge, as global debt fears continue to run rampant and investors await results of European bank stress tests due Friday.

Shares of tech firm Microchip (MCHP) slumped 5.7%, after the company lowered its earnings guidance, saying supply disruptions resulting from the Japanese earthquake were impacting its automotive business.

Adding to the tech sector's pain, shares of Novellus Systems (NVLS) fell 5%, after the company delivered disappointing quarterly results and guidance.