Stocks were set to extend the previous session's steep losses on Friday as concerns mount the economy may slip back into recession and European banks could be unable to weather a credit storm.

Stock index futures reduced losses along with commodities as the dollar weakened.

An absence of economic data and corporate earnings news on Friday shifted attention to technical analysis, with last week's S&P low near 1,100 in focus.

Equities followed declines in Asian and European markets, the latter near 2-year lows on concern over banks.

This fear that there's going to be some widespread problem with banks is pressuring stock prices, said Robert Pavlik, chief market strategist at Banyan Partners LLC in Palm Beach Gardens, Florida.

Technical levels are what market participants are focused on now, he said.

Thursday's low near 1,130 coincides with a strong resistance level last summer, which could continue to provide support. The S&P closed Thursday at 1,140.65, 1.9 percent above the 11-month closing low set last week.

S&P 500 futures fell 16.4 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 lost 141 points and Nasdaq 100 futures dropped 22 points.

Major averages were sharply lower on Thursday, and volatility spiked in a return to the extreme fluctuations investors endured a week ago.

The worsening economic outlook, including Thursday's 2-1/2 year low in a gauge of U.S. regional factory activity, helped lift spot gold to a record high of $1,877 an ounce as investors reached for safety.

Crude futures cut an early 3 percent drop to fall about 0.9 percent to $81.56 a barrel.

Bank of America is cutting 3,500 jobs this quarter according to an internal memo, as the biggest U.S. bank grapples with its $1 trillion problem-loan portfolio and growing economic concerns. Shares fell 2.6 percent to $6.83 in premarket trading.

Hewlett-Packard Co slid 18.3 percent to $24.10 a day after it said it may spin off its PC business, the biggest in the world, and cut its outlook.

(Reporting by Rodrigo Campos; Editing by Kenneth Barry)