US retail sales flatlined at $682.8 billion in July as gasoline prices retreated from record levels while American consumers boosted spending on furniture, food, electronics and at online stores.
Earnings from big-box US chains were also mixed, with Lowe’s topping profit estimates but Target suffering a big drop in earnings as the retailer contends with rising costs.
All three major US indices retreated, with the S&P 500 shedding 0.7 percent.
“The market had been overbought, coming into this week,” said Quincy Krosby of LPL Financial, who added that investors were trying to “digest” recent gains.
Minutes from the latest Federal Reserve meeting in July showed the central bank was committed to raising interest rates further to quell rising prices.
But many officials at the meeting cautioned that there is a “risk” the Fed could go too far as it tries to cool demand to lower prices that have surged at the fastest pace in more than 40 years.
European bourses were also on their back foot as official data showed UK inflation surging to a new 40-year high, with the Consumer Prices Index (CPI) accelerated to 10.1 percent last month from 9.4 percent in June.
The Bank of England warned earlier this month that UK inflation would climb to just above 13 percent this year, which would be the highest level since 1980.
It also projected that the country would enter a recession near the end of the year that the BoE expects to last until late 2023.
Investors remain on edge as central banks hike interest rates to fight runaway inflation, but the monetary policy tightening could threaten to tip economies into recession.
“Markets reacted negatively to the (inflation) news with the (London) FTSE and other European indices falling,” noted City Index analyst Fawad Razaqzada.
“It is progressively becoming difficult for investors to justify maintaining an optimistic view on the stock markets given a challenging global macro-outlook,” he added.
Key figures at around 2030 GMT
New York – Dow: DOWN 0.5 percent at 33,980.32 (close)
New York – S&P 500: DOWN 0.7 percent at 4,274.04 (close)
New York – Nasdaq: DOWN 1.3 percent at 12,938.12 (close)
London – FTSE 100: DOWN 0.3 percent at 7,515.75 (close)
Frankfurt – DAX: DOWN 2.0 percent at 13,626.71 (close)
Paris – CAC 40: DOWN 1.0 percent at 6,528.32 (close)
EURO STOXX 50: DOWN 1.3 percent at 3,756.06 (close)
Tokyo – Nikkei 225: UP 1.2 percent at 29,222.77 (close)
Hong Kong – Hang Seng Index: UP 0.5 percent at 19,922.45 (close)
Shanghai – Composite: UP 0.5 percent at 3,292.53 (close)
Euro/dollar: UP at $1.0178 from $1.0171 Tuesday
Pound/dollar: DOWN at $1.2050 from $1.2096
Euro/pound: UP at 84.44 pence from 84.04 pence
Dollar/yen: UP at 135.08 yen from 134.22 yen
West Texas Intermediate: UP 1.8 percent at $88.11 per barrel
Brent North Sea crude: UP 1.4 percent at $93.65 per barrel