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Futures for the S&P 500, for the Dow Jones and for the Nasdaq 100 were down 0.4 to 0.6 percent. Europe's FTSEurofirst 300 .FTEU3 fell 0.9 percent, while Japan's Nikkei average .N225 dropped 0.7 percent.

House of Representatives Speaker John Boehner's failure to round up enough support for his plan on Thursday exposed a rift in the Republican Party that is hampering efforts to reach a compromise to raise the U.S. debt ceiling before a Tuesday deadline.

House Republicans are due to meet at 10 a.m. (1400 GMT) on Friday to discuss a way forward.

The Commerce Department releases its advance (first) estimate of Q2 GDP at 1230 GMT. Economists in a Reuters survey forecast a 1.8 percent annualized pace of growth compared with a 1.9 percent rate in the final Q1 estimate.

The Labor Department issues at 1230 GMT the Employment Cost Index for the second quarter. Economists in a Reuters survey expect a rise of 0.5 percent versus a 0.6 percent rise in the first quarter.

Chevron ,CVX.N>, the second-largest U.S.-based oil and gas producer, will report second-quarter earnings that are expected to rise as the higher prices for oil and robust refining margins help offset slightly lower total output.

At 1230 GMT the Institute for Supply Management-New York releases July index of regional business activity. In the previous month, the index read 535.3.

The Institute of Supply Management Chicago releases at 1345 GMT July index of manufacturing activity. Economists forecast a reading of 60.0 in the month compared with 61.1 in June.

Thomson Reuters/University of Michigan Surveys of Consumers release at 1355 GMT July final consumer sentiment index. Economists in a Reuters survey expect a reading of 64.0 compared with 63.8 in the preliminary July report.

Merck & Co (MRK.N) is expected to report double-digit profit growth from higher sales of its array of pharmaceuticals and from its growing animal-health business.

Economic Cycle Research Institute (ECRI) releases at 1430 GMT its weekly index of economic activity for July 22. In the prior week the index read 127.5.

The euro zone debt crisis also continues to be a concern to markets. Rating agency Moody's put Spain on review for a possible downgrade on Friday, adding to concerns that a Greek rescue package has done little to halt the spread of Europe's debt crisis.

Amgen (AMGN.O), the world's largest biotechnology company, is expected to post lower profit and revenue as sales of its once top-selling anemia drug Aranesp continues to erode.

Shares in Telenav Inc (TNAV.O) fell 23.5 percent to $13.75 after the bell on Thursday after the company announced results.

On Thursday the Dow Jones industrial average .DJI ended down 62.44 points, or 0.51 percent, at 12,240.11. The Standard & Poor's 500 Index .SPX was down 4.22 points, or 0.32 percent, at 1,300.67. The Nasdaq Composite Index .IXIC finished up 1.46 points, or 0.05 percent, at 2,766.25.

(Reporting by Atul Prakash; Editing by Greg Mahlich)

In his strongest threat of intervention so far, Finance Minister Yoshihiko Noda said that the yen was rising "too much" and deviating from Japan's economic fundamentals.

"Our stance is clear. We will take decisive action against excessive exchange rate volatility," Noda told parliament.

"I'd like to carefully examine how long we can leave current (exchange-rate) moves unattended."

Noda said he hoped to take appropriate action, in cooperation with the Bank of Japan, to address the currency's rise that was hurting exporters and threatening Japan's recovery from damage wrought by the March 11 earthquake and tsunami.

Data released on Friday showed factory output rose further in June and manufacturers expected more gains in July and August that would bring production close to pre-quake levels, but economists said the yen's rise was clouding the outlook.

Policymakers' repeated verbal warnings have not prevented the dollar from sliding toward the record low of 76.25 yen hit in March on growing fears of a U.S. debt default or credit downgrade. It did not move much on Noda's latest warnings and hovered around 77.81.

A senior BOJ official said the central bank was focusing on how recent yen rises could affect a still fragile economic recovery, suggesting its readiness to ease monetary policy further as early as next week if yen climbs further.

SOLO ACTION

Markets rule out a repeat of the co-ordinated intervention that the Group of Seven carried out in the aftermath of the devastating earthquake in March, but some see solo action by Tokyo as a possibility.

Japanese policymakers, alarmed at the persistent nature of yen rises amid a broad-based dollar weakness, see solo action as an increasingly viable option, although markets are skeptical how long its effect would last.

"Noda's verbal warning has escalated slightly," said Michiyoshi Kato, senior vice president at forex sales at Mizuho Corporate Bank.

"It's not about dollar/yen levels alone. Authorities are probably also watching stock markets. If the U.S. debt problem triggers risk aversion and pushes the yen up suddenly, and if that increases worries about the impact on Japan's economy, Tokyo may act."

Policymakers hesitant of intervention have pointed to the resilience of the stock market as a sign the damage to the economy has been contained so far.

But the Nikkei average fell below the psychologically important 10,000 mark and business lobbies have started to complain more vocally about the government's inaction over the strong yen. Noda said he was aware of business concerns.

The BOJ feels the yen rise has yet to severely undermine business sentiment but is prepared to ease policy further if the standoff in U.S. debt talks roils global markets.

"Japan's economy is just recovering from a big shock after the quake. We need to watch out for the negative impact yen rises could have on the economy through exports, corporate revenues and a worsening of business sentiment," BOJ Executive Director Masayoshi Amamiya told parliament on Friday.

Japan's economy is expected to exit recession and grow moderately in July-September as companies make steady progress restoring supply chains hit by the quake.

(Additional reporting by Tetsushi Kajimoto, Stanley White, Rie Ishiguro and Kaori Kaneko; Editing by Tomasz Janowski)

The world's biggest coffee chain, which is coming off a years-long restructuring that involved closing poorly performing stores to rekindle growth, on Thursday reported better-than-expected fiscal third-quarter earnings.

Seattle-based Starbucks joined a raft of other premium-positioned companies -- including burrito chain Chipotle Mexican Grill (CMG.N) and Whole Foods Market Inc (WFM.O) -- in reporting out-sized same-store sales gains.

"The higher end is alive and well," said RBC Capital Markets analyst Larry Miller. Steakhouses and seafood restaurants also had strong results, he said.

"Reports of the consumer's demise were greatly exaggerated," said Miller, who added that McDonald's Corp (MCD.N) and other restaurant chains showed surprising health during the latest quarter.

Sales at Starbucks' U.S. cafes open at least 13 months, and which yield about four-fifths of its revenue, jumped 8 percent in its fiscal third-quarter ended July 3. Analysts expected a 5.3 percent increase.

Traffic in its home market climbed 6 percent, while average spending per visit rose 2 percent.

Chief Financial Officer Troy Alstead told Reuters menu price increases accounted for the bigger part of the rise in spending, but customers were also buying more food.

Starbucks targets more affluent consumers than the typical U.S. fast-food chain. Those customers have fared better than their lower-income counterparts as the U.S. economy sputters, and they have resumed spending on discretionary items like $4 lattes and organic foods.

CATERING TO THE WELL-HEELED

Starbucks shares, which have benefited from a massive restructuring that slashed costs and shut over 900 poorly performing cafes around the world, are up 60 percent from a year ago. On Thursday, it said it would be adding a net 800 stores globally in 2012.

That expansion comes despite high unemployment and the uncertain outcome of the U.S. debt ceiling debate weighing on the minds of consumers.

Upscale diners seem less wary. Chipotle, which offers naturally-raised meats and organic produce where possible, saw same-restaurant sales jump 10 percent in the most recent quarter. Whole Foods, top U.S. seller of organic food products, said its identical-store sales jumped 8.1 percent.

The gains at Starbucks, Chipotle and Whole Foods outpaced a 4.5 percent rise in U.S. same-restaurant sales at McDonald's, one of the restaurant industry's top performers and the leader among fast-food chains.

"Our results are a little bit in contrast to what I still believe to be an uncertain and fragile environment out there," Alstead said.

Wall Street also was upbeat about the coffee chain's new partnership with Green Mountain Coffee Roasters Inc (GMCR.O), whose popular Keurig machines control about 80 percent of the fast-growing North American single-serve brewing segment.

The companies plan to begin selling Starbucks coffee and Tazo tea for Keurig machines at wholesale clubs, drugstores and supermarkets in North America this autumn, in time for the important winter holiday season.

Alstead said the partnership would generate 3 cents to 5 cents in incremental earnings per share in fiscal 2012.

Green Mountain shares soared more than 16 percent on Thursday, one day after it said that deals with the likes of Starbucks and newly public Dunkin' Donuts (DNKN.O) would brew up bigger profits.

Seattle-based Starbucks boosted its earnings forecast for this fiscal year to $1.50-$1.51 per share from $1.46 to $1.48 a share, previously. Analysts, on average, were expecting a fiscal 2011 profit of $1.50 per share.

It also forecast a 15 percent to 20 percent increase in earnings per share in 2012 and a 10 percent increase in revenue. The forecast is based on mid-single digit comparable store sales growth and the opening of net 800 new stores.

The 2012 forecast includes the expected contribution from the Green Mountain deal.

Starbucks' third-quarter net income rose 34 percent to $279.1 million, or 36 cents per share, beating analysts' average estimate by 2 cents per share, according to Thomson Reuters I/B/E/S. Revenue rose 12 percent to $2.93 billion.

Shares were up 1.3 percent to $40.50 in after-hours trade. That gain came after the shares added 2.6 percent in regular Nasdaq trade on Thursday.

(Editing by Edwin Chan, Bernard Orr)

Sales at U.S. cafes open at least 13 months jumped 8 percent in the quarter, more than the 5.3 percent rise analysts expected.

The world's biggest coffee chain gets roughly 80 percent of its revenue from the United States, where traffic was up 6 percent and average spending per visit rose 2 percent.

Chief Financial Officer Troy Alstead on Thursday told Reuters that menu price increases accounted for the bigger part of the rise in spending, but also that customers were also buying more food.

Starbucks targets more affluent consumers than the typical U.S. fast-food chain.

Those customers have fared better than their lower-income counterparts as the U.S. economy sputters, and they have resumed spending on discretionary items like $4 lattes and organic foods -- as evidenced by strong same-store sales results from chains like Starbucks, Chipotle Mexican Grill (CMG.N) and Whole Foods Market Inc (WFM.O).

Same-restaurant sales rose 5 percent for Starbucks' international business during the quarter.

Starbucks shares, which also are benefiting from a massive restructuring that closed more than 900 cafes and slashed costs, are up 60 percent from a year ago.

NET INCOME JUMPS

The Seattle-based company said net income for its fiscal third-quarter ended July 3 rose 34 percent to $279.1 million, or 36 cents per share, beating analysts' average estimate by 2 cents per share, according to Thomson Reuters I/B/E/S.

Revenue rose 12 percent to $2.93 billion.

Starbucks boosted its fiscal year earnings forecast to $1.50-$1.51 per share from $1.46 to $1.48 a share, previously. Analysts, on average, were expecting a fiscal 2011 profit of $1.50 per share.

The company also forecast a 15 percent to 20 percent increase in earnings per share in 2012 and a 10 percent increase in revenue. The forecast is based on mid-single digit comparable store sales growth and the opening of net 800 new stores.

Alstead said Starbucks has locked in coffee prices for the coming fiscal year as the market for beans remains volatile.

The company still expects commodity costs, particularly coffee, to take a 22-cent per share bite out of fiscal 2011 earnings.

"Coffee prices in '12 will be higher than '11 to the tune of 21 cents a share," Alstead said.

Shares rose to $40.84 in after-hours trade from their Nasdaq close of $39.98.

(Reporting by Lisa Baertlein, editing by Bernard Orr)

Initial claims for state unemployment benefits dropped 24,000 to a seasonally adjusted 398,000, the Labor Department said on Thursday.

Economists had forecast claims falling to 415,000.

The labor market took a beating in May and June, with the increase in nonfarm payrolls totaling only 43,000.

The drop in jobless claims last week below the 400,000 mark that is normally associated with a stable labor market will be welcome news for the economy after a recent string of weak data.

U.S. stock index futures rose on the report, while prices for Treasury debt pared gains.

"We've been surprised on the upside the past several weeks, but this drop does signal that in the most recent couple of weeks, employers are not laying off large numbers of individuals," said Patrick O'Keefe, director of economic research at J.H. Cohn in New York.

"What we're seeing is that the claims levels are returning to their more normal level, which is in a positive direction."

But an uncertain economic outlook, which has been further clouded by deadlocked talks to raise the nation's borrowing limit and avoid a damaging debt default and credit rating downgrade could hamper progress in the labor market.

The government is expected to report on Friday that the economy grew at a 1.8 percent annual rate, according to a Reuters survey, after a tepid 1.9 percent pace in the first three months of the year.

On Wednesday, the Federal Reserve said growth slowed in much of the country in June and early July.

A Labor Department official said there were no special factors in last week's jobless claims data.

The four-week moving average of claims, considered a better measure of labor market trends, fell 8,500 to 413,750.

The number of people still receiving benefits under regular state programs after an initial week of aid declined 17,000 to 3.70 million in the week ended July 16.

Data for the so-called continuing claims covered the survey week for the household survey from which the unemployment rate is derived. The jobless rate rose to 9.2 percent in June from 9.1 percent in May.

The number of Americans on emergency unemployment benefits rose 18,427 to 3.17 million in the week ended July 9, the latest week for which data is available.

A total of 7.65 million people were claiming unemployment benefits during that period under all programs, up 320,152 from the prior week.

(Reporting by Lucia Mutikani, Editing by Andrea Ricci)