US stocks fall again as rally runs out of steam

(Close): Wall Street shares have closed lower again after a sharp rally fizzled out in the last hour of trading.

The surprise reversal came despite China's decision earlier to cut its main interest rate to boost growth.

It's the sixth consecutive day of falls for US stocks triggered by fears over China's slowing economy.

The Dow Jones ended down 1.3% at 15,664.3, with the S&P 500 dropping 1.4% to 1,867. 62 and the tech-heavy Nasdaq losing 0.4% to 4,506.49.

Analysts blamed fragile investor confidence for the volatile trading and said continuing fears over China's economy had eventually overruled the initial low values which persuaded investors to buy.

Art Hogan, chief market strategist at Wunderlich Securities said investors were confused.

"They are trying to figure out what the slowdown in China means to the global economy," he said.

Xavier Smith, investment director at Centre Asset Management, said he didn't expect a steady rise in stocks until there was some positive economic data from China.

"Only when we see that will the rallies be sustainable," he said.

Both the Dow Jones and the S&P are on track for their worst monthly losses in six years.

Investors globally are worried that firms and countries that rely on high demand from China - the world's second-largest economy and the second-largest importer of both goods and commercial services - will be affected by the country's slowing growth.