Oil prices fell on Wednesday as US and some European governments mulled the release of strategic oil reserves, while commodity-related shares weighed on global equities.
US stocks fell in the wake of economic data that was slightly below expectations, with energy shares leading the market lower.
France, the United States and Britain are in talks about the possible release of strategic oil stocks to help push fuel prices lower, French ministers said, only weeks ahead of the country's presidential election.
Further pressuring prices, US crude oil inventories posted the largest weekly build since July 2010, according to data from the US Energy Information Administration.
Brent crude, still up more than 15% this quarter, fell 1.4% to below $124 per barrel, while US crude futures lost 2.2%, near $105. US crude is up about 6% so far this year.
The S&P 500 retreated from 4-year highs posted earlier this week and was battling to hold the 1,400 level. US and European equity benchmarks are still on track to post their best first quarter in 14 years.
"Investor anxiety has been rising due to the prolonged and significant rally, and we had a catalyst event in the collapse of energy stocks," said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.
"It's a combination of investor jitters, given how far the rally has come, and technical levels that we are testing."
He said holding the 1,400 level on the S&P 500 was an indication that the market's trend upward was still in place.
In afternoon trading in New York, the Dow Jones industrial average was down 87.79 points, or 0.67%, at 13,109.94. The Standard & Poor's 500 Index was down 11.27 points, or 0.80%, at 1,401.25. The Nasdaq Composite Index was down 28.89 points, or 0.93%, at 3,091.46.
MSCI's main global stock index fell 1%, retreating from an eight-month high hit Tuesday. The pan-European FTSEurofirst 300 index closed down 1%, with oil and bank shares among the biggest losers.
The yen rose 0.4% against the US dollar, lifted by seasonal flows from Japanese exporters buying at the end of their fiscal year. Any gains could be temporary, though, as the Bank of Japan is determined to keep monetary policy ultra loose.
"In general as you get closer to the end of the month you probably see a little more demand for Japanese yen," said Kathy Lien, director of FX research at GFT in Jersey City, who added that much of the repatriation activity already happened last week. "I don't expect repatriation to take dollar/yen lower than 82," she said.
US Treasures traded mostly flat on the day, weighed down by tepid demand at the Treasury's $35 billion sale of five-year notes.
The benchmark 10-year US Treasury note was down 4/32, the yield at 2.1997%.
New orders for long-lasting US factory goods rose less than expected in February and a gauge of future business investment also fell short of forecasts, casting a shadow on the manufacturing sector's support of the recovery.
