The Dow Jones industrial average was down 74.89 points at 10,017.3 points at 2.15pm.

The drop came after new housing start figures for September fell below economists’ expectations.

The figures, from the US Commerce Department, revealed the number of privately owned new homes on which construction has started is still 28.2 per cent below last year’s rate of 822,000.

A separate study, from the Labor Department, showed producer prices dropped an unexpected 0.6 per cent in September. Analysts had forecast that prices would remain unchanged after rising 1.7 per cent in August.

The data overshadowed a series of strong corporate results.

Caterpillar saw profit in its third quarter fall 53 per cent but raised its full-year earnings outlook for 2009 and said it expects higher demand next year as the global economy improves.

Jim Owens, chief executive of Caterpillar, said: “We are seeing encouraging signs that indicate a recovery may be underway.”

Pfizer, the drugs giant, also helped to lift investor sentiment, unveiling third quarter figures which topped Wall Street estimates.

The group, fresh from completing its $67 billion purchase of Wyeth last week, reported a 26 per cent rise in third quarter net earnings to $2.88 billion, or 43 cents a share, up from $2.28 billion, or 34 cents a share, a year earlier.

Coca-Cola, however, reported lower-than-expected quarterly revenue, hurt by declines across all its businesses, and said a weak economy would keep consumers under pressure next year, sending shares down 2.4 per cent.

In London, the FTSE 100 closed down 38.14 points at 5,243.40, having hit a fresh high for the year at 5,298.54 earlier in the session.

The biggest faller was Autonomy, the technology company, which dropped 138p or 8.65 per cent to £14.57 after its third quarter update missed expectations.

Barclays was another big loser, shedding 18.30p or 4.79 per cent to 363.75p after Qatari Holding, the sovereign wealth fund, said it was partially exiting its investment in the bank.