U.S. stock index futures dropped on Tuesday as a key index of German business sentiment fell unexpectedly, denting confidence in a global economic recovery and weighing on European shares.

The data overshadowed better-than-expected quarterly results from Home Depot Inc , as the top home improvement chain benefited from improved efficiency and forecast a fiscal-year profit above estimates. Its shares jumped more than 2 percent to $30.98 in premarket trade.

German business sentiment declined for the first time in almost a year in February, suggesting that Europe's largest economy may slide back into contraction in the first quarter into a much-feared double-dip recession.

The news out of Germany that is putting pressure on the European bourses is spilling over here, said Peter Cardillo, chief market economist at Avalon Partners in New York. It is a market that is basically following European markets lower as the risk aversion trade kicks in.

S&P 500 futures fell 3.4 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 were off 29 points, and Nasdaq 100 futures lost 7.75 points.

Home Depot swung to a fourth-quarter profit versus a loss a year ago. Excluding items, the latest-quarter profit was 24 cents a share, beating the average estimate of 17 cents.

In a busy day for retailers, Sears Holdings Corp said quarterly profit more than doubled despite slightly weaker revenue. Its shares were lightly traded in premarket.

Other retailers due to report include Target Corp , the No. 2 U.S. discount retailer, and department store operator Macy's Inc .

Consumer confidence data, due at 10 a.m. EST (1500 GMT) is expected to show U.S. consumers are a little less upbeat, while the S&P/Case-Shiller house price index of 20 major U.S. cities is expected to have fallen 3.2 percent in December, according to a Reuters poll, better than the 5.3 percent fall in January. Case-Shiller is due at 9 a.m. EST (1400 GMT)

The FTSEurofirst 300 <.FTEU3> index of leading European shares fell 0.5 percent, paring gains after the Ifo German index of business sentiment fell.

(Reporting by Edward Krudy; editing by Jeffrey Benkoe)