US stocks extended losses as data showing an unexpected rise in weekly jobless claims refuelled recovery fears in the world's biggest economy.
The Dow Jones Industrial Average dropped 59.03 points (0.57 per cent) to 10,319.52 in closing trades, after losing more than one per cent in early trading.
The tech-rich Nasdaq composite index slipped 18.36 points (83 per cent) to 2,190.27 while the broader S&P 500 index fell 5.88 points (0.54 per cent) at 1,083.59.
"There were some built in skepticism over the market not advancing further in the month of august," said Marc Pado, US market strategist for Cantor Fitzgerald.
"You already know the economy is slowing somewhat, the question of how much slowing, you fully expect numbers to tick down."
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Data released before the market opening showed US jobless benefits jumped unexpectedly last week to the highest level in about six months, fuelling concerns unemployment could dampen recovery.
Initial claims climbed by 2,000 to 484,000 in the week to August 7 from the previous week's upwardly revised figure of 482,000.
Most economists had expected 465,000 new claims.
On Wednesday, Wall Street nosedived as data showing the US trade gap had widened sharply in June -- to the highest level in 20 months -- piled on top of an already gloomy outlook by the Federal Reserve.
The Dow Jones Industrial Average tumbled 2.49 per cent, posting its worst percentage drop in nearly a month.
Stock markets across the world also slid as many investors ditched risky assets in favour of safe-haven trades amid rising fears of a second-dip recession.
In Europe, stock markets which lost two percent and more on Wednesday closed narrowly mixed after spending much of Thursday in the red.
London's FTSE 100 index of leading shares gained 0.40 percent at 5,266.06 points but in Paris, the CAC 40 slipped 0.20 percent to 3,621.07 points and in Frankfurt the DAX shed 0.31 percent at 6,135.90 points.
In Asian trade earlier Thursday, Tokyo was down 0.86 percent, Hong Kong dropped 0.89 percent and Shanghai and Sydney each lost 1.23 percent.
"The next few (trading) sessions should provide clues whether the pessimism has increased enough to contain stocks to a short-lived pullback, or whether the market is in for a longer, deeper pullback," Wells Fargo chief technical market strategist Scott Marcouiller said.
