Wall Street was headed for a third day of losses on Tuesday as fears of a systemic crisis in the euro zone grew, sending index futures sharply lower.

In a rerun of the spring selloff in equity markets, U.S. stocks fell sharply in the last session as European officials for the first time refused to rule out default by Greece and investors feared the crisis could overtake Spain and Italy.

The markets have been gripped by fear, how real it is hard to say, said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

Is it just the news flow that is causing this? Is it hedge fund managers that are causing this or is there something really more systemic here, he said.

A selloff in Asia was swiftly followed in Europe. The FTSEurofirst 300 <.FTEU3> index of top European fell 1.5 percent, while Japan's Nikkei average <.N225> lost 1.4 percent. Wall Street posted its worst day in a month on Monday.

Early trading suggested economically sensitive areas, such as industrials and banking, would lead a broader market decline. Citigroup fell 1.5 percent to $39.20 while General Electric fell 1.2 percent to $18.40.

S&P 500 futures slipped 15.10 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 dipped 111 points, and Nasdaq 100 futures fell 19.75 points.

The S&P 500 found support at its 50 and 100-day moving averages at around the 1,316 level in the last session. Tuesday's move in futures threatened to take the index below that. In June the index rallied off its 200-day moving average, which now stands at around 1,270.

Euro zone finance ministers on Monday promised cheaper loans, longer maturities and a more flexible rescue fund to help Greece and other EU debtors in a bid to stop financial contagion engulfing Italy and Spain, but there are fears the rescue effort is unraveling. They will continue their meeting on Tuesday.

The euro stumbled to an all-time low against the Swiss franc on Tuesday as euro zone government bond yields vaulted higher, prompting investors to dump the single currency for safer ones.

As many as six Spanish banks have failed the European stress tests, including five savings banks and one medium-sized bank, ABC newspaper reported on Tuesday, citing unnamed sources.

There was little for investors to cheer closer to home. President Barack Obama and congressional leaders, struggling to break an impasse over taxes and spending cuts, will regroup on Tuesday to seek common ground for a deal to avoid a looming U.S. debt default.

Alcoa Inc shares were up 1 percent after the bell on Monday as America's biggest aluminum producer posted a big jump in second-quarter profit. However, in early trading the stock look set to get caught up in the wider, commodity-linked selloff, falling 1.6 percent to $15.65.

The U.S. corporate earnings season is widely expected to be good and could provide some counterbalance to the troubles engulfing the euro zone.

The Commerce Department releases May international trade figures at 8:30 a.m. (1230 GMT). Economists forecast a $44.0 billion deficit compared with a $43.7 billion deficit in April.

(Reporting by Edward Krudy; Editing by Kenneth Barry)

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