Wall Street stocks fell after several days of muted trading as investors took a defensive posture before Federal Reserve Chairman Ben Bernanke's much-awaited speech.
Bernanke, due to speak to central bankers in Wyoming, at 10 am (local time) on Friday, is expected to keep markets guessing about the timing of another round of bond purchases.
The mood was cautious in financial markets due to the high stakes surrounding the Fed chairman's speech as well as a meeting of the European Central Bank on Thursday that is expected to take pressure off highly indebted countries.
Central banks face pressure to combat the weakness in the economy. In a sign of slowing growth, shares of mining companies fell as iron ore prices dropped to the lowest level since 2009.
US-traded shares of BHP Billiton dropped 3.8 per cent to USUS$58.11.
All 10 S&P industry sectors were lower, with technology .GSPT, energy .GSPE and materials .GSPM leading the decline.
The benchmark index dipped below the 1,400 mark at the close for the first time since August 6.
US economic data over the past two weeks have been a little stronger than expected, and Reuters polls show investors and economists were more sceptical the Fed will announce a new round of bond buying at its September meeting.
"If (Bernanke) doesn't tip his hand, then the market is going down on the speech," said Uri Landesman, president of hedge fund Platinum Partners.
"I don't think the market hangs in around 1,400 if he doesn't say anything substantive."
The Dow Jones industrial average .DJI dropped 106.77 points, or 0.81 per cent, to 13,000.71.
The Standard & Poor's 500 Index .SPX dropped 11.00 points, or 0.78 per cent, to 1,399.49. The Nasdaq Composite .IXIC dropped 32.47 points, or 1.05 per cent, to 3,048.71.
The S&P had barely budged over the prior three sessions - resulting in a decline of merely 0.05 per cent - and hasn't closed with a 1 per cent move in either direction since August 3.
Volume continued to be anaemic with the week's daily average so far at 4.49 billion shares changing hands on the New York Stock Exchange, NYSE MKT and Nasdaq.
This week's four days so far are among the five lowest for volume all year.
Most US retailers posted better-than-expected sales gains in August at stores open at least a year, boosted by back-to-school buying and setting the stage for a strong third quarter.
Despite the August sales results, the Morgan Stanley retail index .MVR fell 0.6 per cent as it was weighed down by a drop in Sears Holdings Corp.
Sears' shares tumbled 7.9 per cent to US$52.90 after S&P Dow Jones removed the company from the benchmark S&P 500 index, effective after the close of trading on September 4. Chemicals maker LyondellBasell Industries, which will replace Sears, rose 3.8 per cent to US$48.67.
Economic data showed consumer spending enjoyed its biggest rise in five months while the number of Americans filing new claims for jobless benefits held steady last week.
Pandora Media Inc surged 14.3 per cent to US$11.52 a day after reporting adjusted second-quarter earnings that beat expectations and raising its full-year outlook.