Stock futures were setting up for a big fall on Wednesday as oil prices continued their free fall and European and Asian markets pulled back from a rally a day earlier.

S&P 500 futures were down 1.6%, Dow Jones Industrial Average futures slid 1.8%, and Nasdaq futures tumbled 1.9%.

Global markets engaged in a steep selloff after a major rally on Tuesday. In Asia, the Hang Seng in Hong Kong fell to its lowest level since the financial crisis, while the Nikkei in Japan fell into a bear market, down more than 20% from its recent high. All European markets were lower. 

Crude oil prices continued to fall on Wednesday after closing at their lowest level since September 2003 a day earlier. Pressure remained after the International Energy Agency warned that global oil market could "drown" in oversupply this year as Iranian oil floods demand. West Texas Intermediate was down 3.1% to $27.59 a barrel.

Energy prices continued to pressure inflation with the Consumer Price Index in the U.S. falling 0.1% in December. Excluding volatile items such as food and energy, core prices rose 0.1%. Over the past 12 months, consumer prices have risen 0.7%, or 2.1% excluding energy. 

The housing sector showed seasonal weakness as U.S. housing starts fell 2.5% in December to a rate of 1.15 million. Homebuilder permits fell 3.9% in December to 1.23 million. Total housing starts in 2015 climbed 10.5%, while permits jumped 12%. 

Goldman Sachs (GS - Get Report) reported adjusted fourth-quarter earnings of $4.68 a share, topping the estimates of Wall Street analysts. The stock fell 1.6% in premarket trading on Wednesday.

 

Royal Dutch Shell (RDS.A - Get Report)  said it expects its fourth-quarter profit to drop by at least 40% to between $1.6 billion and $1.9 billion after a sharp drop in crude oil prices. Energy companies are expected to have suffered a brutal fourth quarter as crude oil prices squeezed margins. 

Netflix (NFLX - Get Report) climbed 3% in premarket trading after reporting a better-than-expected quarter. The streaming service said it added 5.59 million subscribers in its fourth quarter, better than estimates of 5.15 million, boosted by international expansion. 

IBM (IBM - Get Report) fell nearly 5% after suffering its 15th straight quarter of falling revenue. The company reported revenue of $22.06 billion in its fourth quarter, down from $24.11 billion a year earlier. Quarterly profit of $4.84 a share came in 3 cents above estimates. 

Microchip (MCHP - Get Report)  finally secured a deal with Atmel (ATML) after another bid from Dialog Semiconductor (DLGNF) fell through. The semiconductor company offered Atmel $8.15 a share for a total valuation of $3.4 billion.