Stocks were poised for a higher start earlier, as investors pinned their hopes on an upbeat forecast from Cisco Systems. But as the clock ticked closer to the opening bell, futures turned lower, following a downturn in European stocks.
The swing to the red came, as European stocks drifted into negative territory and fell to session lows, amid ongoing jitters about the region's debt crisis.
Ever since Standard & Poor's stripped the United States of its AAA credit rating last week, fears have been building that rating agencies may also downgrade AAA-rated nations in Europe, since they are also struggling with massive debt problems.
Concerns about the solvency of French bank Societe Generale, or SocGen, are also weighing on markets, despite the bank's denial of the allegations.
Earlier, investors were showing optimism about Cisco's better-than-expected guidance for the current quarter. Shares of Cisco (CSCO, Fortune 500) jumped nearly 12% in premarket trading.
Jobless claims were also better than forecast, falling below the key 400,000 level for the first time in four months.
World markets:

Economy: A report from the Labor Department showed that weekly jobless claims fell to 395,00 last week, down 7,000 from the prior week.
That reading was better than the 409,000 claims economists were expecting.
The U.S. trade deficit grew to $53.1 billion in June, from $50.8 billion in May. The trade deficit was also wider than the $48 billion expected.
Companies: Companies reporting on Thursday include chip maker Nvidia (NVDA), and retailers Kohl's (KSS, Fortune 500) and Nordstrom (JWN, Fortune 500).
Gold futures for December delivery rose $5.30 to $1,789.60 an ounce, after setting an intraday record high of $1,817.60 an ounce.
Oil for September delivery slipped 24 cents to $82.65 a barrel.
Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 2.20% from 2.14% late Wednesday.