All three main indexes in New York as well as London, Paris and Frankfurt turned lower Thursday, having ended at record highs the day before.
The losses came as investors digested data showing US inflation had slowed in April after coming in above forecasts the previous three months.
The reading boosted hopes the Fed could reduce rates as soon as July, but warnings about the outlook for prices tempered that optimism and saw traders lower their forecasts to one cut this year, from two tipped on Wednesday.
Three top officials at the US central bank pushed back against talk of an early cut, adding that they wanted to see more evidence that inflation was under control.
Cleveland Fed boss Loretta Mester said that "incoming economic information indicates that it will take longer to gain that confidence".
"Holding our restrictive stance for longer is prudent at this point as we gain clarity about the path of inflation."
She was joined by New York counterpart John Williams, who said he saw no reason to reduce just now, while Richmond boss Thomas Barkin said it would take time to get inflation back to the bank's two percent goal.
Their remarks were echoed by JPMorgan Chase chief Jamie Dimon, who said he was still worried about price rises and that there was still plenty of upward pressure that meant borrowing costs might have to be kept elevated.
"There are a lot of inflationary forces in front of us," he told Bloomberg Television. "The underlying inflation may not go away the way people expect it to."
Still, some Asian markets continued to rise, with Hong Kong boosted by a rally in tech firms after strong earnings reports from Baidu and JD.com.
Market heavyweight HSBC weighed on the Hang Seng Index, dropping more than two percent on a report that major shareholder Ping An Insurance was considering lowering its stake in the banking giant.
A much-slower-than-expected rise in Chinese retail sales, meanwhile, revived worries about the world's number two economy. That was partially offset by a forecast-topping read on industrial output.
Shanghai also rose, with investors keeping an eye on a planned meeting between leaders and housing ministry officials to discuss the country's beleaguered property sector, which has dragged the economy for years.
The gathering comes after reports said Beijing was looking at proposals that would see local governments buy up large swathes of unsold stock to help distressed developers, who are drowning in a sea of debt.
There were also gains in Taipei and Jakarta.
But Tokyo, Sydney, Seoul, Singapore, Manila and Wellington fell.
However, while traders are moving a little more cautiously, Miller Tabak + Co's Matt Maley was confident in the outlook for stocks.
"There is a lot of leeway for the stock market if we do see a short-term pullback soon," he said.
"Put another way, the bulls are still fully in charge right now, and so it will take a significant reversal to stem the tide of the upside momentum."
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: DOWN 0.4 percent at 38,782.08 (break)
Hong Kong - Hang Seng Index: UP 0.4 percent at 19,458.82
Shanghai - Composite: UP 0.1 percent at 3,124.74
Dollar/yen: UP at 155.77 yen from 155.40 yen on Thursday
Euro/dollar: DOWN at $1.0858 from $1.0870
Pound/dollar: DOWN at $1.2659 from $1.2670
Euro/pound: UP at 85.78 from 85.76 pence
West Texas Intermediate: UP 0.1 percent at $79.31 per barrel
Brent North Sea Crude: UP 0.2 percent at $83.46 per barrel
New York - Dow: DOWN 0.1 percent at 39,869.38 (close)
London - FTSE 100: DOWN 0.1 percent at 8,438.65 (close)
dan/cwl
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