Stocks on both sides of the Atlantic dropped as concern about Europe's political and financial instability returned and Wall Street's five-year highs left investors with vertigo in the absence of signs to justify current valuations.
The latest American economic report also disappointed.
Orders to US factories advanced 1.8 percent in December after a revised 0.3 percent slide the prior month, according to Commerce Department data. The gain though fell short of estimates of analysts polled by Bloomberg News and Reuters, which had predicted increases of 2.3 percent and 2.2 percent, respectively.
That report put a damper on enthusiasm stemming from Friday in the US when a slew of data seemed to point to a strengthening recovery.
In afternoon trading in New York, the Dow Jones Industrial Average dropped 0.90 percent, while the Standard & Poor's 500 Index shed 0.91 percent and the Nasdaq Composite Index declined 1.26 percent.
Shares of Wal-Mart Stores slid, last 1.6 percent lower at $US69.37 after earlier falling as low $US69.13, after JPMorgan Chase reduced its rating on the stock.
Shares of Oracle dropped, last 2.4 percent lower, after the company agreed to buy Acme Packet for about $US2.1 billion. Acme Packet shares soared, climbing 22 percent.
Shares of Herbalife also sank, last down 3.7 percent, after The New York Post reported the company is facing an investigation by the Federal Trade Commission.
In Europe, the Stoxx 600 Index ended the day with a 1.5 percent slide from the previous close. Benchmark stock indexes also dropped in London, Frankfurt and Paris.
German stocks were hurt after the nation's second biggest bank, Commerzbank, posted a wider than expected quarterly loss and warned of more trouble ahead.
Spain's IBEX 35 plunged 3.8 percent amid calls for Prime Minister Mariano Rajoy to resign amid fury over reports of corruption involving the ruling party. He has denied allegations.
Spanish bonds dropped, sending the nation's 10-year yield up 23 basis points to 5.44 percent.
"The prospect of Rajoy's resignation has roiled the markets," Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York, told Reuters.
"Any fresh political instability in (the) euro zone's most important periphery economy could undermine the sense of investor confidence and send Spanish yields higher, making it much more difficult for the government to implement its austerity measures."
Italy, meanwhile, is plagued by concern about the increasing popularity of Silvio Berlusconi as the nation heads to the polls in three weeks. A potential election victory for the former premier could curb efforts to reform the country's finances.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- MARKET CLOSE: NZ shares fall, following Aussie market
- Pumpkin Patch receivers expected to target Christmas shoppers
- Restaurant Brands agrees to pay $US105m for Hawaiian fast-food chain
- What can we learn from Wynyard’s voluntary administration?
- Landcorp Farming forecasts wider annual loss, no dividend
Most listened to
- Massey University's David Tripe talking about ANZ's exposure to Pumpkin Patch
- NBR's Jenny Ruth on Abano's major shareholder's continuing feud with the company
- Better by Design's Geoff Suvalko explains how a struggling business can turn around
- John Key says further RMA will be needed - but he needs a mandate to do so
- Craigs' Mohandeep Singh on Bapcor's takeover offer for Hellaby