Wall Street fell as investors locked in some profits ahead of Friday's US government jobs report which should provide fresh clues about when the Federal Reserve is likely to start reining in its bond-buying program
In afternoon trading in New York, the Dow Jones Industrial Average dropped 0.67 percent, the Standard & Poor's 500 Index declined 0.45 percent, while the Nasdaq Composite Index fell 0.34 percent.
"In general, the idea of tapering and rising interest rates is still at the forefront," Bryant Evans, portfolio manager at Cozad Asset Management in Champaign, Illinois, told Reuters.
Bill Gross, co-founder and co-chief investment officer of bond giant Pimco, today offered another cautionary comment for investors. "Global economies and their artificially priced markets are increasingly at risk," he said in his monthly letter to investors.
Gross said investors "are all playing the same dangerous game that depends on a near perpetual policy of cheap financing and artificially low interest rates in a desperate gamble to promote growth."
Declines in shares of DuPont, Walt Disney and 3M led the Dow lower. US Treasuries gained, pushing the yields on the 10-year bond 3 basis points lower to 2.76 percent.
All eyes are Friday's Labor Department report which is expected to show that American employers hired 181,000 workers in November.
"The market is still trying to find equilibrium before the employment data," Adrian Miller, director of fixed-income strategies at GMP Securities in New York, told Bloomberg News. "It's a market that's trying to position itself ahead of that number."
Equity gains for 2013 remain robust, with the Dow having rising 24 percent and the S&P 500 having jumped 28 percent.
Taking the edge off that rally are indications that US holiday sales are proving disappointing.
"The market is telling us sales volumes and margins are becoming more of a concern," Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York, told Bloomberg News. "The holiday season may be more disappointing than investors previously thought, especially in the US and particularly for boutique-type retailers."
Discounts helped propel American car sales in November. General Motors and Chrysler estimated the industry's US sales of November at a seasonally adjusted annualised rate surpassed 16 million vehicles. That was better than analysts had expected.
"It's pretty clear that the industry was super aggressive," Jonathan Browning, chief executive of Volkswagen of America, told Reuters.
In Europe, the Stoxx 600 Index dropped 1.5 percent. The UK's FTSE 100 dropped 1 percent, while Germany's DAX sank1.9 percent.
France's CAC 40 plunged 2.7 percent after Credit Suisse downgraded its recommendation on French equities.
Not helping sentiment either was a report showing euro-zone producer prices fell 0.5 percent for the month and posted the fastest annual rate of decline in nearly four years.
Investors will eye a meeting of European Central Bank policy makers on December 5, gathering for the first time since their surprise interest rate cut last month.