Wall Street erased earlier gains after a report showing US manufacturing grew at its slowest pace in two years last month underpinned recent data indicating the world's largest economy might be teetering on the brink of recession.
In afternoon trading, the Dow Jones Industrial Average fell 0.71 per cent, the Standard & Poor's 500 Index dropped 0.99 per cent and the Nasdaq shed 1.25 per cent. Earlier in the session, the S&P 500 had risen as much as 1.2 per cent.
The Institute for Supply Management said on Monday its index of national factory activity fell to 50.9, from 55.3 in June and well short of economists' expectations of a 54.9 reading.
"One has to carefully consider this economic data point as an indication of a continuing slowdown which will perhaps bleed into earnings," Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, New Jersey told Reuters. "It indicates a lack of vitality that would improve employment."
The market had opened positive amid optimism about a last-minute deal to raise the US debt ceiling, and avoid a default.