Economic data weighed on Wall Street and stocks in Europe as reports showed that US business activity grew at the most sluggish pace since November 2009 and that Spain slid back into a recession.
The real downer for Wall Street was that the Institute for Supply Management-Chicago's business barometer fell to 56.2 in April from 62.2 a month earlier. That was lower than the most pessimistic forecast in a Bloomberg News survey.
In afternoon trading in New York, the Dow Jones Industrial Average fell 0.31 per cent, the Standard & Poor's 500 Index declined 0.62 per cent to 1,394.70 while the Nasdaq Composite Index shed 0.81 per cent.
"We have a multiple of issues here. Spain is casting a negative tone in the market here, but after last week's rally, the market was set for some profit taking," Tim Ghriskey, chief investment officer at Solaris Asset Management, Bedford Hills, New York, told Reuters. "The 1,400 level [for the S&P 500] is a bit of an issue too. It's creating that resistance."
While American first-quarter results have been positive overall, with about three-quarters of the companies who have reported so far exceeding estimates, there were disappointments today including from Humana.
Yet the mood remains optimistic for Wall Street. Individual price forecasts for stocks show the combined projection for the S&P 500 has climbed to 1,569.74, surpassing the October 2007 record, according to more than 10,000 analyst estimates compiled by Bloomberg. At the same time, strategists who base their predictions on assessments of the economy say this year's 12 per cent rally represents all the gains investors will see.
"There is a two-way pull in the market at the moment," Kevin Lilley, a European fund manager at Old Mutual Asset Managers UK in London, told Bloomberg. "On the one hand, company results coming through are generally better than expected on both sides of the Atlantic, and on the other hand, economic data has been mixed."
Bucking the trend today was Barnes & Noble, as the bookseller's stock soared more than 60 per cent, on Microsoft's agreement to invest US$300 million in its digital and college operations. The deal values the Nook and textbook businesses at US$1.7 billion, according to Reuters.
In Europe, the Stoxx 600 Index ended the day with a 0.7 per cent slide.
The Spanish economy contracted by 0.3 per cent in the first three months of 2012, after shrinking by the same rate in the last quarter of 2011, according to the National Statistics Institute in Madrid.
"The wheels are very clearly coming off," Jefferies economist David Owen told Reuters. "It wouldn't surprise me to see a very significant decline in GDP both in the second and third quarters this year."
The renewed concern about the euro zone has hit the region's currency, which has lost 4.5 per cent against the Japanese yen in April and has weakened 0.8 per cent against the greenback.