Stock index futures dropped on Tuesday on a subpar start to earnings season following Alcoa Inc's worse-than-expected results and Chevron Corp's warning that its income would be sharply lower.

Alcoa recorded a narrower quarterly loss late Monday, but Wall Street's forecast was for a small per-share profit, and the aluminum company's stock fell 5.7 percent to $16.45 before the bell.

Alcoa is the first Dow index component to report, and the miss disappointed investors.

That disappointment was compounded when fellow Dow member Chevron warned Monday its fourth-quarter results would be sharply lower than the previous quarter because of further deterioration in oil refining margins. The shares fell 1.5 percent to $79.69 in early trading.

With Alcoa setting the earnings stage with a negative report, investors will be questioning the extent and durability of the economic recovery, said Andre Bakhos, president of Princeton Financial Group in North Brunswick, New Jersey. Eventually it always comes down to earnings, and this is a disappointing start to the season.

S&P 500 futures fell 6.8 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 dropped 66 points, and Nasdaq 100 futures lost 14 points.

Electronic Arts Inc slashed its fiscal 2010 forecast late Monday on weak holiday sales in Europe and a shift in the way it distributes its video games. The stock fell 9.9 percent to $16.46 in premarket trading.

Homebuilder KB Home is expected to post a quarterly loss of 56 cents per share, versus a $3.96 a share loss a year ago, while grocery retailer Supervalu Inc is forecast to earn a 40 cents per share quarterly profit compared to 62 cents a year ago.

U.S. industrial shares lifted the Dow and the S&P 500 on Monday to new 15-month highs after China bolstered expectations the world economy would strengthen, but the Nasdaq fell on profit-taking in technology stocks.

(Editing by Padraic Cassidy)

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