Earnings from companies including Dow Chemical and United Parcel Service disappointed as investors await a slew of economic data including the all-important monthly jobs report tomorrow.
Shares of Dow Chemical, last 5 per cent weaker, and shares of UPS, last down 2.1 per cent, suffered after reporting a disappointing outlook and earnings.
"The outlook is fairly benign right now," Brian Gendreau, a market strategist at Los Angeles-based Cetera Financial Group, told Bloomberg. "We are looking at moderate growth. Earnings picture is good. No one is talking about double-dip recession."
In other corporate news, shares of Facebook initially fell, dropping as low as US$28.74 as the company's earnings fuelled concern about margins. The stock recovered later in the session and was last up 0.5 per cent to US$31.36.
Qualcomm's earnings, however, beat estimates, boosting its stock 4.8 per cent.
Of the 231 companies in the S&P 500 that have reported earnings so far this season, 69.3 per cent have exceeded expectations, according to Thomson Reuters data.
Today's economic data provided a positive note after yesterday's report showing an unexpected contraction in the US economy in the fourth quarter. Business activity in the US grew more than forecast in January, with the MNI Chicago Report's business barometer climbing to 55.6, from 50 in December.
Even so, jobless claims climbed more than predicted last week, rising 38,000 to 368,000.
The focus is on the monthly jobs report, due tomorrow. It is expected to show employers added 165,000 workers in January, according to economists' projections in a Bloomberg survey, while the unemployment rate probably held at 7.8 per cent. Economists polled by Reuters predict that the US added 160,000 jobs in January.
In afternoon trading in New York, the Dow Jones Industrial Average fell 0.18 per cent, while the Standard & Poor's 500 Index declined 0.20 per cent. The Nasdaq Composite Index eked out a 0.04 per cent gain.
Countering the recent rise in optimism, Pimco chief Bill Gross said in his February newsletter that there's more trouble ahead for the world's biggest economy.
"Our current monetary system seems to require perpetual expansion to maintain its existence," Gross said. "The advancing entropy in the physical universe may in fact portend a similar decline of 'energy' and 'heat' within the credit markets."
In Europe, the Stoxx 600 Index finished the session with a 0.5 per cent slide from the previous close. The equity benchmark still has risen 2.7 per cent in January, its eighth month of gains, according to Bloomberg.
Stocks in London, Frankfurt, and Paris all ended lower.
Shares in Germany's largest lender, Deutsche Bank, advanced even as it posted a massive quarterly loss because investors welcomed news that it has boosted its capital ratio.
German unemployment provided a surprise drop in January, underpinning the Bundesbank's comments last week that Europe's engine economy was showing already signs of recovery in the first quarter of this year.