Investors were also wary ahead of a potentially tense meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping, the first between the world's two most powerful leaders.
Topping the agenda at Trump's Mar-a-Lago resort in Florida will be whether he makes good on his threat to use U.S.-China trade ties to pressure Beijing to do more to rein in its nuclear-armed neighbour North Korea.
Lingering fears of a possible trade war kept Asian markets on edge. MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.2 percent.
Japan's Nikkei fell 1 percent and Australia's ASX 200 eased 0.3 percent.
Sentiment had already been bruised when U.S. House of Representatives Speaker Paul Ryan said there was no consensus on tax reform and it would take longer to accomplish than healthcare.
Markets have risen in recent months in part on speculation fiscal stimulus would boost U.S. growth and inflation.
Minutes of the Fed's last meeting also showed most policymakers thought the U.S. central bank should begin trimming its $4.5 trillion balance sheet later this year, much earlier than many had expected.
"Central bank asset purchases and broader largesse have been a key support factor for markets for nearly a decade," said ANZ economist Felicity Emmett, who wondered if the global economy could cope with such a sea change.
"Raising the fed funds rate a quarter of a point every now and then is tinkering at the edges compared to the elephant in the room that is the balance sheet."
The reaction was whiplash on Wall Street. The Dow posted its largest intra-day downside reversal in 14 months after shedding a gain of more than 198 points to end near the session low.
The Dow ended down 0.2 percent, while the S&P 500 lost 0.31 percent and the Nasdaq 0.58 percent.
Stocks had initially rallied when data showed U.S. private employers added a surprisingly strong 263,000 jobs in March, spurring speculation that the official payrolls report on Friday would also impress.
Treasuries had likewise eased at first, but rebounded late in the session as safe-havens were sought. Yields on 10-year paper came right back to 2.33 percent, threatening a hugely important chart barrier at 2.30 percent.
The drop in yields dragged the dollar down on the yen, where it was last at 110.42 and nearing chart support in the 110.11/27 zone.
Against a basket of currencies, the dollar was off 0.15 percent at 100.410. The euro was a shade firmer at $1.0681.
In commodity markets, oil ticked lower after the U.S. government reported a surprise increase in U.S. crude inventories to a record high.
U.S. crude was down 31 cents at $50.84 a barrel, while Brent lost 30 cents to $54.06.
Easily the biggest mover this week has been coking coal which surged 43 percent on Singapore-listed futures after Cyclone Debbie slammed into top supplier Australia, crippling exports of the steelmaking raw material.
© Thomson Reuters 2017
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