Wall Street slid. In 2.06pm trading in New York, the Dow Jones Industrial Average fell 0.2 percent, while the Nasdaq Composite Index retreated 0.4 per cent. In 2.08pm trading, the Standard & Poor's 500 Index slid 0.4 per cent.
When Fed Chair Janet Yellen speaks in Boston on Friday, investors will watch closely for any hints about the timing of the next rate increase. The Fed's policy makers next meet November 1-2.
A Labor Department report showed initial claims for state unemployment benefits were unchanged at a seasonally adjusted 246,000 for the week ended October 8, the lowest since November 1973.
"The data are making the Fed's current policy look too wrong footed and the markets are waiting for them to get back on track, most likely in December," Chris Rupkey, chief economist at MUFG Union Bank in New York, told Reuters.
In the Dow, declines in shares of Goldman Sachs and those of DuPont, down 1.4 per cent and 1.2 per cent respectively, outweighed gains in shares of Wal-Mart and those of Merck, recently 1.5 per cent and 1.3 per cent stronger respectively.
China was a big issue at the beginning of the year and now it spooks investors with some issues resurfacing.
JPMorgan, Wells Fargo and Citigroup are poised to report results on Friday.
In Europe, the Stoxx 600 Index ended the session with a slide of 0.9 per cent. The UK's FTSE 100 Index gave up 0.7 per cent, Germany's DAX Index declined 1 per cent, while France's CAC 40 Index dropped 1.1 per cent.
Mining shares tumbled in London, along with base metals, on concern about demand from top consumer China.
Shares of Unilever closed 3.4 per cent lower in London after the company reported a 0.4 per cent drop in the volume of goods sold in the third quarter. It posted a 3.6 per cent increase in pricing for the quarter.
Separately, Unilever said it resolved a dispute with Tesco over price increases, the Guardian reported.
Tesco's stock of Unilever products such as Marmite and Ben & Jerry's had depleted after the British grocer balked at prices increases, according to media reports.