U.S. stock index futures fell on Tuesday, extending a drop in global equities, as doubts about the ability of Europe to tackle its debt crisis sent Italy's bond yields back into a perceived danger zone.

Prime Minister-designate Mario Monti is meeting the leaders of Italy's biggest two parties to discuss the many sacrifices needed to reverse a collapse in market confidence as the yield on Italy's 10-year benchmark bond leaped above 7 percent.

European stocks <.FTEU3> fell 1.1 percent in early trading, adding to the previous session's drop, and following on from weakness in Asian markets overnight, where Tokyo's Nikkei 225 <.NK225> closed down 0.7 percent.

The danger is -- and the markets are keenly aware of this -- that this crisis, like most, turn on a dime and can blow up very, very quickly, said Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, New York.

U.S. bank shares, sensitive to flare-ups in Europe's debt crisis, looked set to be among the biggest losers. In premarket trade, shares of Citigroup Inc fell 1.8 percent to $27.87, while the SPDR financial exchange traded fund dropped 1.5 percent.

As long as the (European Central Bank) continues to be unwilling to become the lender of last resort and really pull out the bazooka you are going to continue to see these scares, said Pursche.

S&P 500 futures fell 11.4 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration of the contract. Dow Jones industrial average futures slid 110 points, and Nasdaq 100 futures lost 20.5 points.

When Italian bond yields rose above 7 percent last week, the S&P 500 fell nearly 4 percent in one day. Heightened volatility has marked U.S. equities trading recently as investors fret about the debt crisis.

Bond prices in other European nations also rose sharply. In France and Austria, yields on the benchmark 10-year both hit 3.6 percent.

The rise in the yields of countries that were until recently thought to be more isolated from the crisis is creating new worries of a wider conflagration in European debt markets.

In the latest earnings reports, Wal-Mart Stores Inc'S quarterly profit missed expectations as the economy continues to weigh on customers at Wal-Mart U.S., its largest division. Its shares dropped 2.3 percent to $57.52.

Home Depot Inc reported stronger-than-expected results, sending it shares up 2 percent to $39.02.

On the economic front, the Commerce Department releases October retail sales at 8:30 a.m. EST (1330 GMT). Economists expect an increase of 0.3 percent in October versus a 1.1 percent rise in September. Excluding automobiles, sales are expected to increase 0.1 percent versus a 0.6 percent rise in September.

The Labor Department releases the October Producer Price Index at 8:30 a.m. (1330 GMT). Economists forecast a fall of 0.1 percent versus a 0.8 percent rise in September. Excluding volatile food and energy items, PPI is expected to rise 0.1 percent versus a 0.2 percent increase in the prior month.

The New York Federal Reserve releases its Empire State Manufacturing Survey for November at 8:30 a.m. (1330 GMT). Economists look for a reading of minus 2.10 compared with minus 8.48 in October.

(Editing by Jeffrey Benkoe)