A bigger-than-expected slide in US manufacturing weighed on Wall Street, bolstering concern about a slowdown in the pace of expansion in the world's largest economy.
That fear was muted by expectations the US Federal Reserve will take action to help accelerate growth if needed.
The Institute for Supply Management said on Monday its index of national factory activity dropped to 49.7 in June from 53.5 in May. That fell short of expectations for the 52.0 reading predicted in a Reuters poll of economists and was below even the lowest forecast.
The reading marked the first time in almost three years that the index has fallen below the 50 mark that separates expansion from contraction.
"Clearly this is the biggest sign yet that the US is catching the slowdown that is well under way in Europe and China," Paul Dales, senior US economist at Capital Economics in London, told Reuters.
In late afternoon trading in New York, the Dow Jones Industrial Average was down 0.22 per cent. The Standard & Poor's 500 Index eked out a 0.04 per cent gain, while the Nasdaq Composite Index was 0.12 per cent higher.
It wasn't all bad news on the American economic front.
Separate reports showed construction spending climbed to the highest level in almost 2-1/2 years last month, boosted by investment in residential and federal government projects, while lending to small businesses also gained in the same period to its strongest level this year.
Merger and acquisition activity helped some stocks. Shares in Amylin Pharmaceuticals jumped on Bristol-Myers Squibb's offer to buy the company, while shares in Best Buy soared amid expectations for a takeover.
In Europe, the Stoxx 600 Index closed the day with a 1.5 per cent advance. Benchmark indexes rose in Paris, Frankfurt and London.
Investors are betting on a cut in interest rates by the European Central Bank on Thursday.
ECB officials will lower their benchmark rate by 25 basis points to a record low 0.75 per cent, according to the median forecast in a Bloomberg survey of 57 economists. Five predict a cut of 50 basis points and 12 foresee no change.
The euro fell after Finland and the Netherlands opposed a plan for the euro zone's permanent bailout fund to buy government bonds in the secondary market, casting doubt on the deal announced Friday to keep Spain and Italy from falling deeper into the debt and banking crisis.
And pressure continues to rise on UK banks. Prime Minister David Cameron announced a parliamentary inquiry into the nation's banking industry after Barclays was fined for rigging interest rates and the lender's chairman, Marcus Agius, resigned, Bloomberg reported.