Wall Street halted a seven-day gain as investors positioned for the next move from the US Federal Reserve and President Barack Obama's plan for Syria.
In late afternoon trading in New York, the Dow Jones Industrial Average was steady at 15,326.26. The Standard & Poor's 500 Index fell 0.18 per cent while the Nasdaq Composite Index edged 0.06 per cent lower.
Initial claims for state unemployment benefits fell 31,000 to a seasonally adjusted 292,000, the lowest level since April 2006, according to the Labor Department said. However, the larger-than-expected drop was in part due to computer issues in two undisclosed states, lowering the number of reported applications.
Still, economists said the data were indicative of the recovery in the jobs market.
"While the information value of this week's report looks limited, claims have been signalling an improving labour market," Jim O'Sullivan, chief US economist at High Frequency Economics in Valhalla, New York, told Reuters.
Investors are gearing up for the Federal Reserve's two-day policy meeting, starting on September 17. Policy makers are expected to begin easing back the pace of its US$85 billion-a-month bond-buying program.
"If they cut by more than US$10 billion or US$15 billion, the initial reaction will be negative," Nicholas Colas, chief market strategist at the ConvergEx Group in New York, told Reuters.
Colas expects a reduction of US$10 billion in purchases of Treasuries.
Gold prices fell after the jobless claims data. Gold futures for December delivery fell 2.6 per cent to US$1,327.80 an ounce on the Comex in New York.
"Today's data is another nail on the coffin, and people expect the announcement on tapering to come next week," Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago, told Bloomberg News. "People are getting bearish about gold."
Shares of Walt Disney rose, last up 3.1 per cent, after the entertainment company announced plans to buy back US$6 billion to US$8 billion of its stock starting next year.
Shares of Lululemon Athletica dropped, last 4.8 per cent weaker, after the yoga-wear retailer downgraded its full-year profit forecast.
Meanwhile the US budget deficit shrank to US$147.9 billion in August, from US$190.5 billion in the same month last year, according to the Treasury Department.
In Europe, the Stoxx 600 Index ended the day about 0.1 per cent lower than the previous close. France's CAC 40 fell 0.3 per cent. Both the UK's FTSE 100 and Germany's DAX closed at a similar level to the previous day.
Euro-zone industrial production shrank more than expected in July, declining 1.5 per cent from June, according to European Union's statistics office. That's bad news for the fragile recovery of the region.
The "data call into question the region's recovery," Chris Williamson, chief economist at Markit Economics in London, told Bloomberg News. "There is clearly a risk that GDP could contract again in the third quarter, as some of this second-quarter growth proves to have been only temporary."