Wall Street, Macy's slide overnight

Wall Street fell overnight amid disappointing earnings from Macy's and as investors anticipate the US Federal Reserve will start reducing its bond-buying program as early as next month.

Shares of Macy's fell, last down 3.7 per cent, after the company downgraded its earnings forecast for this year and reported a surprise drop in sales.

A slew of recent speeches by Fed officials have left investors betting that the central bank will ease the pace of its bond purchase sooner, rather than later.

The speeches also have muddied the debate.

A majority of economists polled by Bloomberg News forecast the Fed will reduce its bond-buying program at next month's policy meeting. The Federal Open Market Committee's first step may be tapering monthly debt purchases by US$10 billion to a US$75 billion pace, according to the median estimate in a Bloomberg survey of 48 economists done August 9-13.

St Louis Fed President James Bullard warned that "inflation has been running very low."

"I have been concerned about low inflation," Bullard told a Rotary Club luncheon in Paducah, Kentucky, according to Reuters. "There has not been much indication, so far, that it has been ticking back up toward target."

The US Labor Department today reported that producer prices were flat in July, compared with expectations of a 0.3 per cent increase.

In late afternoon trading in New York, the Dow Jones Industrial Average dropped 0.67 per cent, the Standard & Poor's 500 Index shed 0.46 per cent, while the Nasdaq Composite Index weakened 0.38 per cent. Pacing losses in the Dow were shares of Johnson & Johnson and Home Depot.

Bucking the trend were Apple shares, climbing another day after Carl Icahn tweeted that he had a "large position" in the company. The stock rose as high as US$504.25 earlier in the day and was last up 2.3 per cent at US$501.45.

Shares of Steinway Musical Instruments jumped, last up 7.8 per cent, after the piano maker agreed to be bought by Paulson & Co after the hedge fund boosted its offer.

In Europe, the Stoxx 600 Index ended the day with a gain of 0.3 per cent, closing higher for the fifth session in a row. Germany's DAX rose 0.3 per cent, while France's CAC 40 gained 0.5 per cent. The UK's FTSE 100 Index shed 0.4 per cent.

The euro-zone's economy is recovering better than expected. The region's gross domestic product grew 0.3 per cent in the second quarter, following a 0.3 per cent contraction in the previous three months, according to the European Union's statistics office.

Both the German and the French economies expanded more than anticipated in the second quarter, posting growth of 0.7 per cent and 0.5 per cent respectively.

"Europe is showing signs of life and is exiting recession earlier than many expected," Witold Bahrke, a Copenhagen-based senior strategist at PFA Pension, told Bloomberg News.