Stocks on both sides of the Atlantic fell amid further signs of economic struggle in Japan and Europe and as hopes for an immediate boost from the US Federal Reserve fade.
Data showed retail sales in Japan posted a larger-than-expected drop in July from a year earlier, while economic confidence in the euro zone decreased more than forecast.
The latest US reports, while not as dire, were mixed again. Consumer spending increased 0.4 per cent in July, Commerce Department figures showed. Claims for jobless benefits were steady last week.
"The improvement in spending activity suggests that overall economic activity may be off to a fairly decent start in the third quarter," Millan Mulraine, senior macro strategist at TD Securities in New York, told Reuters.
In late afternoon trading in New York, the Dow Jones Industrial Average fell 0.67 per cent, the Standard & Poor's 500 Index shed 0.71 per cent and the Nasdaq Composite Index declined 0.93 per cent.
Tomorrow Fed Chairman Ben Bernanke will address a gathering of central bankers in Jackson Hole, Wyoming. Opinions on whether he will announce fresh measures to stimulate the world's largest economy vary.
Bernanke "is probably not going to do anything this coming Friday because the labour market has been a little bit firmer than it was," Kevin Gardiner, head of investment strategy for Europe, Middle East and Africa at Barclays's wealth- management unit in London, told Bloomberg. "The Fed on balance will conclude that they don't need to do anything just yet."
However, today's auction of US seven-year bonds received support from those betting on further quantitative easing by the Fed. The securities yielded 1.081 per cent, compared with a forecast of 1.087 per cent in a Bloomberg News survey of eight of the Fed's 21 primary dealers.
In Europe, the Stoxx 600 Index ended the day with a 0.8 per cent slide from the previous close. National benchmark stock indexes in the UK, France and Germany also declined, losing 0.4 per cent, 1 per cent and 1.6 per cent respectively.
Unemployment in Germany rose for a fifth consecutive month. Trouble keeps brewing in Spain as Murcia became the country's third region to say it will need emergency loans, highlighting the deterioration of the nation's finances.
Italy's borrowing costs eased as the nation sold 7.29 billion euros of debt at its first auction in a month.
"It's a lower yield than the previous one," Elisabeth Afseth, fixed-income analyst at Investec in London, told Reuters. "I think it is very much to do with the ECB, and if we hadn't had that, I suspect that both Spanish and Italian yields would have been considerably wider than where they are."