New figures have revealed a surprise decline in US consumer confidence, dashing hopes that free-spending shoppers would revive the sluggish economy.
US shoppers: In no mood to spend
The University of Michigan's closely-watched consumer sentiment index fell back to 87.2 in June from 92.1 in May, confounding analysts' expectations of a moderate increase.
The Michigan index is seen as a reliable guide to consumer spending, which accounts for two thirds of all economic activity in the US.
Ominously, the future expectations component of the index - which gauges consumers' outlook on the future of the economy - fell particularly steeply, tumbling to 84.2 in June from 91.4 last month.
The decline is thought to reflect growing worries about unemployment amid a recent spate of job losses.
Wall Street wobbles
The Michigan figures weighed on share prices, helping push the benchmark Dow Jones share index down 0.7% to 9,130 by about 1425 GMT.
"There had been whispers that the (sentiment) number might be disappointing. But this is more than disappointing, we're back to square one," said Chris Rupkey, economist at Bank of Tokyo-Mitsubishi in New York.
The weak confidence figures, along with separate data showing that US factory gate prices dipped by 0.3% in May, exacerbated concerns that the world's biggest economy could be at risk of falling into a deflationary spiral.
Deflation - where falling prices discourage consumer spending and choke off economic growth - has emerged as a potentially serious threat to the global economy since the end of the 1990s boom.
Last month, US Federal Reserve chairman Alan Greenspan sounded the alarm on deflation, although he stressed the risk was minor.
The latest batch of economic data are thought likely to reinforce the case for a further cut in borrowing costs when the Federal Reserve holds its next rate-setting meeting on 24 and 25 June.