Worldwide shares dipped into negative territory today with Standard & Poor's cut to Ireland's credit rating weighing on sentiment and as fears persisted over the outlook for the global economy.
New data from the United States also showed the housing sector continues to suffer.
Irish banking stocks were under pressure, with Allied Irish Banks down 2.7 per cent after falling as much as 5.2 per cent and Bank of Ireland flat after ratings agency S&P downgraded its credit ratings on Ireland and assigned the country a negative outlook, citing substantially higher costs to support its struggling financial institutions.
However, the Iseq index of leading shares bucked the global trend by bouncing back from yesterday's losses. By 5.22pm it was trading up 18.81 points to 2638.93.
US stocks lost ground today after data showed single-family home sales fell in July to set their slowest pace on record, while prices were the lowest in more than 6.5 years, implying further loss of momentum in the economic recovery.
The new home sales data follows a report yesterday that showed sales of existing homes dropped by a record rate to a 15-year low.
The Dow Jones industrial average was down 64.25 points, or 0.64 per cent, to 9,976.20. The Standard &Poor's 500 fell 8.31 points, or 0.79 per cent, to 1,043.56. The Nasdaq Composite lost 13.16 points, or 0.62 per cent, to 2,110.60.
World equities measured by the MSCI All-Country World Index dropped 0.5 per cent, down for a fifth straight session, and the Thomson Reuters euro zone peripheral index lost 0.8 perc ent.
In Europe, S&P's one-notch cut in Ireland's rating overshadowed a better than expected German business morale reading for August from the Ifo think tank.
"The Ireland downgrade was not too much of a surprise but it is still weighing on sentiment," said Joshua Raymond, market strategist at City Index in London.
In addition to the US housing data, a separate government report showed new orders for manufactured goods excluding transportation equipment posted their largest decline in 1.5 years in July, pointing to a slowdown in manufacturing.
The reports were the latest indication of subdued US economic growth and an increased risk of a slide back into recession, though most analysts still do not believe a double-dip recession is imminent.
The view that the economic recovery was fading fast led investors to pile into US Treasury bonds, seen as a safe-haven investment in times of economic uncertainty. Slowing growth also means there will be little inflationary threat to longer-dated Treasuries.
Japan's Nikkei business daily reported Japan's Ministry of Finance may intervene on its own to sell yen if speculators drive up the currency. The dollar has lost nearly 9 per cent against the yen this year.
Finance minister Yoshihiko Noda reinforced that view, telling reporters that recent yen moves were one-sided and Tokyo will respond appropriately when necessary.
The dollar was up 0.4 per cent at 84.56 yen, and up 0.2 per cent against a basket of currencies. The yen also fell from a nine-year peak against the euro.
Tokyo's Nikkei average had lost 1.7 per cent to hit a 16-month closing low on disappointment over the lack of policy action by the authorities to rein in the strong yen, which threatens Japan's fragile economic recovery.
Illustrating concerns over global growth, miner BHP Billiton said it was cautious on the short-term outlook and that the economy in China, its biggest customer, would slow from recent highs.
The FTSEurofirst 300 index of leading European shares was down 0.5 per cent, having been in positive territory earlier after the Ifo data, which also boosted the euro.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC-40 lost 0.3 to 0.6 per cent.
Additional reporting: Reuters