Wall Street declined amid disappointing earnings from Macy's and Walt Disney, which fuelled concern US consumers are keeping their purse strings tight.
Shares of Macy's tumbled, trading 14.4 per cent weaker as of 2.54pm in New York, after the largest US department store company downgraded its full-year sales and earnings outlook.
"We are seeing continued weakness in consumer spending levels for apparel and related categories," Terry Lundgren, Macy's chief executive officer, said in a statement. "In particular, our sales trend relative to expectations meaningfully slowed beginning in mid-March, and first quarter results are below our original outlook."
"Headwinds also are coming from a second consecutive year of double-digit spending reductions by international visitors in major tourist markets where Macy's and Bloomingdale's are key destinations, as well as a slowdown in some center core categories-further intensifying the challenges associated with growing topline sales revenue," Lundgren said.
Macy's gloomy outlook pushed shares of other retailers such as Nordstrom and Wal-Mart lower too.
Wall Street fell. In 2.56pm New York trading, the Dow Jones Industrial Average dropped 1.2 per cent, while the Nasdaq Composite Index shed 0.9 per cent. In 2.40pm trading, the Standard & Poor's 500 Index fell 0.7 per cent.
Declines in shares of Walt Disney and those of Wal-Mart, last 4.4 per cent and 3.6 per cent lower respectively, led the drop in the Dow.
Disney also reported quarterly results that failed to meet analysts' expectations. It was the first shortfall against analysts' projections in five years, according to data compiled by Bloomberg.
The company said it shut down its Infinity video-games unit.
Shares of Fossil plunged, down 29 per cent as of 3.15pm trading in New York, after the company cut its full-year earnings forecast.
"We're getting a lot of news on US consumers today and it isn't good news," Kim Forrest, senior equity research analyst, Fort Pitt Capital Group in Pittsburgh, told Reuters.
Meanwhile, shares of Office Depot and Staples sank, down 39.2 per cent and 17.8 per cent in late afternoon trading in New York respectively, after their planned merger was blocked by regulators.
In Europe, the Stoxx 600 Index ended the session with a 0.5 per cent drop from the previous close. France's CAC 40 index slid 0.5 per cent, while Germany's DAX index dropped 0.7 per cent. The UK's FTSE 100 index eked out a 0.1 per cent gain.
Shares of Austria's Raiffeisen Bank International closed 11 per cent lower after it said it is considering a merger with its majority owner.
"Earnings so far have been OK but not strong enough to deliver a real upside for stock prices," Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf, Germany, told Bloomberg. "What is still really missing from this environment is a notable rally in the banking stocks which is an important driver for any stock market rally."