Wall Street slipped from record highs amid comments by a US Federal Reserve official that the central bank should start tapering its bond-buying program next month.
In late afternoon trading in New York, the Dow Jones Industrial Average fell 0.32 per cent, the Standard & Poor's 500 Index eased 0.20 per cent and the Nasdaq Composite Index slipped 0.07 per cent. Declines in shares of Intel, last down 1.3 per cent, and Travelers, last down 1.1 per cent, weighed on the Dow.
Investors might be relying too much on the Fed's stimulus program, Dallas Fed President Richard Fisher said in a speech in Portland, Oregon.
"A corollary of reining in this massive monetary stimulus in a timely manner is that financial markets may have become too accustomed to what some have depicted as a Fed 'put'," Fisher said. "Some have come to expect the Fed to keep the markets levitating indefinitely. This distorts the pricing of financial assets, encourages lazy analysis and can set the groundwork for serious misallocation of capital."
"I am of the opinion that unless we see some disturbing data ... that we should start in September," Fisher told reporters after the speech, adding that he is not alone at the Fed in that view, according to Reuters.
Last week Fed Chairman Ben Bernanke made renewed reassurances that US accommodative monetary policy was here to stay, a point also made by his counterpart at the European Central Bank, Mario Draghi, days later.
"It's a minor move in the market because we knew that this was Fisher. If [St Louis Fed President James] Bullard came out and said this, then that would've created a huge move," Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey, told Reuters. "It's a guessing game every day because different speakers have different opinions."
More opinions will be heard in the coming days. Chicago Fed President Charles Evans will host a press breakfast on Tuesday, while Cleveland Fed President Sandra Pianalto speaks in Cleveland on Wednesday.
On the economic data front, the Institute for Supply Management's index of US non-manufacturing businesses climbed to a better-than-expected 56 in July from 52.2 in June.
In Europe, the Stoxx 600 Index rose 0.2 per cent from the previous close. Germany's DAX slipped 0.1 per cent, while the UK's FTSE 100 fell 0.4 per cent. France's CAC 40 rose 0.1 per cent.
Here, disappointing earnings from HSBC weighed on markets and the mood. The bank said it may have to pay up to US$1.6 billion to settle a mortgage dispute in the US.
Still, there was good news as Markit's index of activity in the services industry increased to 49.8 in July, from 48.3 in June, and up from an initial estimate of 49.6 on July 24.