Wall Street declined overnight amid concern Congress might not make the October 1 deadline for a short-term spending agreement needed to ensure the US government can avert a shutdown.
Treasury Secretary Jack Lew warned Congress that the US would exhaust its borrowing capacity no later than October 17, at which point it would have only about US$30 billion in cash on hand, according to Reuters.
The uncertainty helped fuel demand for a US Treasury auction of US$35 billion in five-year bonds, which drew a higher-than-expected yield of 1.436 per cent.
Gold also received a boost, bolstering demand for the metal that is perceived to be a safehaven investment. Gold futures for delivery in December gained 1.5 per cent.
In late afternoon trading in New York, the Dow Jones Industrial Average fell 0.24 per cent, the Standard & Poor's 500 Index declined 0.17 per cent, and the Nasdaq Composite Index slipped 0.09 per cent.
Shares of Wal-Mart dropped, last down 1.8 per cent, leading the drop in the Dow.
Wal-Mart told suppliers it is cutting orders this quarter and next to address rising inventories, Bloomberg News reported, citing a September 17 email from an ordering manager at the retailer.
"Wal-Mart's inventory is well above their goal," Poonam Goyal, an analyst at Bloomberg Industries, said. "Most of the inventory increase was because of missed sales."
The latest economic data were mixed. US durable goods orders inched 0.1 per cent higher in August, according to Commerce Department data. New orders for core durable goods, which are viewed as a gauge of business spending plans, rose just 1.5 per cent in August. That was below economists' expectations, Reuters said, and not enough to make up for the 3.3 per cent decline registered in July.
"Companies are still cautious in their capex [capital expenditure] due to the uncertain economic scenario," Annalisa Piazza, an analyst at Newedge Strategy, told Reuters.
Separately, purchases of new homes climbed 7.9 per cent in August to an annual rate of 421,000 units, the Commerce Department said.
Americans are losing faith in the nation's economic recovery even as forecasters expect growth to accelerate, according to a Bloomberg National Poll. The results of the September 20-23 poll reflect public impatience with an economy that has grown at an average rate of 2.1 per cent since the recession's June 2009 end, a full percentage point below the 50-year average.
In Europe, the Stoxx 600 Index finished the session with a 0.1 per cent decline from the previous close. The UK's FTSE 100 fell 0.3 per cent. Germany's DAX and France's CAC 40 closed near the same level of the previous day's close.
In Germany, a gauge of consumer confidence compiled by GfK rose to the highest level in six years, exceeding expectations of analysts polled by Reuters and Bloomberg News in separate surveys.
"German consumers are expecting the economy to gain momentum in the next few months," GfK said in a statement. "There is a clear upwards trend."