US stocks extended losses today, as investors pulled back after days of gains built on optimism over expectations of progress on a resolution to the euro zone debt crisis.

EU officials are reported to be working on a last-minute proposal to raise the combined lending limit of the EFSF rescue fund and the permanent structure that will replace it, the ESM. The latter fund was due to be launched in 2013 but efforts are said to underway to bring that forward by a year.

The Nasdaq fell 1 per cent, and the Dow Jones industrial average was down 78.60 points, or 0.65 per cent, at 12,071.53.

The Standard & Poor's 500 Index was down 10.50 points, or 0.83 per cent, at 1,247.97. The Nasdaq Composite Index was down 30.07 points, or 1.13 per cent, at 2,619.49.

The euro declined against the dollar and the yen as concern increased that European leaders will struggle to agree to measures needed to stem the region's debt crisis at a summit this week.

The 17-nation currency extended its drop after a report that the European Central Bank may announce a range of measures tomorrow to stimulate bank lending, according to three euro-area officials. The Dollar Index rose for the first time in three days before European leaders gather for a summit in Brussels the next two days.

"A lot hinges on what comes out of the ECB and the EU meetings for the euro," said Vassili Serebriakov, a currency strategist at Wells Fargo and Co in New York. "People are questioning the outcome of the meeting, but also questioning the sense of urgency that the European leaders have."

The euro weakened 0.1 per cent to $1.3383 at 10.05am in New York after rising as much as 0.4 per cent. The 17-nation currency fell 0.2 per cent to 104 yen. The Japanese currency was little changed at 77.73 per dollar.

Agencies