Stocks were set to retreat from five-month highs at the open on Friday after reports that Standard & Poor's was set to downgrade the ratings on several euro zone countries.

A senior euro zone source said S&P would announce the downgrades of several nations later Friday, adding that Germany was not one of them.

The euro dropped sharply on the news and futures extended losses, testing the recent market view that U.S. equities were delinking from European markets.

When news like this hits, there is always a reaction and obviously, this isn't a good one, said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York.

There seems to have been some sort of a leak from S&P and whether this is real or not, who knows. But the market is selling off as a reaction, giving its some credibility.

S&P 500 futures fell 12 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 80 points and Nasdaq 100 futures shed 12.5 points.

JPMorgan Chase & Co fell 3.8 percent to $35.45 in premarket trading after the bank said fourth-quarter profit fell as the European debt crisis weighed on trading and corporate deal-making.

The Select Sector Financial SPDR exchange-traded fund dropped 1.3 percent, auguring a decline in the bank sector. An index of lenders' stocks <.BKX> has risen almost 11 percent in the new year.

JPMorgan's results could be enough to make people take a bit of profits off that strong move, said Brian Lazorishak, senior quantitative analyst and portfolio manager at Chase Investment Counsel in Charlottesville, Virginia.

On the macroeconomic front, the preliminary reading for the Reuters/University of Michigan consumer sentiment index will be released at 9:55 a.m. EST.

Economists forecast a January sentiment reading of 71.5 versus 69.9 in the final December report.

The S&P 500 closed at a five-month high for the third day on Thursday but had difficulty extending gains in the face of lackluster economic data.

(Reporting by Rodrigo Campos; additional reporting by Angela Moon; editing by Jeffrey Benkoe)

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