Wall Street grew anxious on Friday after news that Britain's central bank was forced to rescue mortgage lender Northern Rock, suggesting a global credit crisis was spreading.
U.S. stocks struggled to overcome early losses, while oil prices backed off record highs as the outlook for growth dimmed in the world's major economies.
Nervous customers lined up to withdraw savings at Northern Rock branches across Britain, raising fears that damage from a housing-led retrenchment in lending may get worse.
Classic symptoms of a run on a bank are now the result of the current credit crisis after UK Bank Northern Rock seeks emergency funding from the Bank of England, said Ashraf Laidi, chief FX analyst at CMC Markets US.
Major stock indexes were lower, hurt in part by data showing weaker U.S. retail sales outside the auto sector.
The Dow Jones industrial average was down 4.96 points, or 0.04 percent, at 13,419.92. The Standard & Poor's 500 index was down 1.04 points, or 0.07 percent, at 1,482.91. The Nasdaq Composite Index was down 1.34 points, or 0.05 percent, at 2,599.72.
European stocks ended lower as shares of financial institutions fell on the news of the problems at Northern Rock. The pan-European FTSEurofirst 300 index closed down 1.12 percent at 1,507.22.
The dollar rose on the day but was not far above all-time lows against the euro as investors braced for the first reduction in U.S. interest rates in four years, expected following the Federal Reserve's meeting on Tuesday.
But in Japan the Nikkei closed up 1.94 percent on a weaker yen, active buying of futures and gains by exporters. The Nikkei finished up 306.23 points at 16,127.42.
The dollar was up against a basket of major trading-partner currencies, with the U.S. Dollar Index up 0.29 percent at 79.743 from a previous session close of 79.513.
The euro was down 0.13 percent at $1.3849 from a previous session close of $1.3867. Against the Japanese yen, the dollar was up 0.23 percent at 115.28 from a previous session close of 115.01.
Bond prices edged lower, but only because the session's economic figures were not sufficiently weak to support the possibility of a heftier half percentage point rate cut.
People are just taking chips off the table, said Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York.
The benchmark 10-year U.S. Treasury note was down 7/32, with the yield at 4.4933 percent while the 2-year U.S. Treasury note was down 3/32, with the yield at 4.0789 percent.
Industrial production grew 0.2 percent in August, the government reported. That was lower than analyst forecasts but was coupled with upward revisions to July.
Consumer confidence improved slightly so far this month, but remained near its lows for the year, suggesting tighter credit and a barrage of bad news from the housing sector are battering a key driver of America's economic strength.
The deteriorating economic outlook, along with a subsiding hurricane in the Gulf of Mexico, helped oil prices come down after hitting highs above $80 a barrel on Thursday.
U.S. light sweet crude oil fell 29 cents, or 0.36 percent, to $79.80 per barrel, and spot gold prices rose $5.80, or 0.82 percent, to $714.00.
(Additional reporting by Burton Frierson)