Traders work on the floor at the New York Stock Exchange in New York, Thursday, May 19, 2022. AP
Downcast earnings reports from retailers have heightened worries about consumer resilience at a time of rising interest rates, surging energy prices, China lockdowns and the Ukraine war.
"Inflation is catching up and profit margins are taking a hit. Soon enough though, those higher costs will continue to be passed on and consumers will stop dipping into savings and start being more careful with their spending," said Craig Erlam, senior market analyst at OANDA.
"The question is whether we're going to see a slowdown or a recession," he said.
Leading European and Asian stock indices closed in the red.
On Wall Street, the Dow was lower in late morning trading but both the broader S&P 500 and tech-heavy Nasdaq Composite were higher.
Shares in Chinese tech giants plunged after Tencent reported lacklustre profits, fuelling wider concerns over China's economic outlook.
Tencent shares plunged more than eight percent in early trading before paring losses slightly, a day after it posted its slowest revenue gain since going public in 2004.
Among other tech titans, Alibaba dropped more than six percent.
On Wall Street Wednesday, all three major US indices dived, with the Dow sinking more than 1,150 points or 3.6 percent.
The Nasdaq plunged 4.7 percent by the close.
"Consumer confidence is likely to drop further as incomes are squeezed. Those big falls in shares of retailers -- Target and Walmart -- and others such as Amazon and Apple we saw on Wednesday certainly point towards this trend," said Fawad Razaqzada, market analyst at City Index and FOREX.com.
"Inflation is not going to be easing significantly any time soon, at a time when the economic outlook also appears grim."
Michael Hewson, chief market analyst at CMC Markets, said the US dollar suffered as well on Thursday "driven by lower yields as concerns grow about the resilience of the US economy over the course of the rest of the year".
In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell this week said the US central bank would raise interest rates until there is "clear and convincing" evidence that inflation is in retreat.
But higher borrowing costs increases debt, heaping further pressure on consumers and businesses.
The United States is facing the fastest inflation in four decades, as is Britain, causing the Bank of England to also raise interest rates.