In opening trades, the Dow Jones Industrial Average tumbled 138.64 points (1.10 per cent) to 12,443.54, extending losses from the prior session.

The tech-rich Nasdaq composite retreated 22.23 points (0.95 per cent) to 2,309.34 and the Standard & Poor's 500 index shed 10.31 points (0.75 per cent) to 1,357.37.

Inflation worries remained on the front burner as crude oil hit fresh highs above 103 dollars a barrel in New York.

Meanwhile an inflation index in a report on US personal income and spending showed consumer prices rose 0.4 per cent in January while core prices, excluding food and energy costs, increased 0.3 per cent.

Economic fears were heightened as AIG, the world's biggest insurer, said it expects the US housing market to remain weak and credit market uncertainty to persist.

'This news (from AIG) and the subsequent comments have given the bears some fuel,' said Mark Fightmaster at Schaeffer's Investment Research. -- AFP