Stock futures fell on Friday, suggesting Wall Street shares could open under pressure after British mortgage lender Northern Rock became the biggest UK casualty of the current liquidity squeeze.

December Standard & Poor's 500 futures were down by 0.5 percent by 0948 GMT, having surrendered all the day's gains, while Dow Jones futures were down 0.4 percent and Nasdaq 100 futures were off by 0.7 percent.

European shares dropped after Northern Rock took an emergency loan from the Bank of England and issued a profit warning. The company has no exposure to subprime loans but it has a small deposit base and so draws most of its funding from money markets, where three-month lending rates have spiked to nine-year highs as credit has tightened.

Shares in mortgage finance company Fannie Mae were among the top 10 fallers among major U.S.-listed stocks traded in Europe, falling 1 percent to 44.12 euros in Frankfurt, while investment bank Lehman Brothers was the biggest percentage decliner, down 2.5 percent from the close in Frankfurt on Thursday to 42.51 euros.

The Northern Rock news comes as a setback after a calmer week for stocks.

We've had quite a good week so far; there was a feeling that we're trying to get through this thing, there was no headline news and hopes for a rate cut next week, said Jonathan Monk, senior portfolio manager at Aegon Asset Management.

It's very much the last resort to go to the Bank of England. That's obviously re-raised the liquidity concern, he said.

HOPING FOR A CUT

The S&P 500 has risen by more than 2 percent so far this week in anticipation of the Federal Reserve cutting the benchmark fed funds rate by a quarter of a percentage point to 5 percent when it concludes its policy meeting on September 18.

Financial futures suggest many traders are looking for a much deeper cut than this, but the rhetoric from U.S. policymakers has been conflicting.

Everyone is assuming that we will get a rate cut, but we've had mixed signals from the Fed, Monk said.

On the one hand, they're saying 'we want to make sure there is enough liquidity', but on the flipside there are a lot of Fed officials saying the problem has been caused by bad lending practices, he said.

On Thursday, the broader U.S. equity market got a boost from a rise in financial shares and fast-food chain McDonald's Corp., which raised its annual dividend by 50 percent.

The Dow Jones industrial average ended up 133.23 points, or 1 percent, at 13,424.88. The Standard & Poor's 500 Index was up 12.39 points, or 0.84 percent, at 1,483.95. The Nasdaq Composite Index was up 8.99 points, or 0.35 percent, at 2,601.06.

Adding to uncertainty in the market is the upcoming August report on retail sales at 1230 GMT.

Investors will be keen to see how consumer spending held up in August, when turbulence in the financial markets took off as foreclosures and default rates on home loans soared.

Consumer spending accounts for about two thirds of overall U.S. economic activity, so a decline in retail sales could be more worrying for the Fed than last week's shock fall in the notoriously volatile nonfarm payrolls figures.

The U.S. data calendar also boasts figures on industrial output for August and consumer sentiment for early September.

Meanwhile, tech heavyweights Cisco Systems and Dell Inc. were also down sharply in European trade. Cisco fell 1.7 percent from the last close in Frankfurt to 22.57 euros, while Dell fell 1.5 percent to 19.24 euros.

United kingdom U.S. Fannie mae