By Saqib Iqbal Ahmed

NEW YORK (Reuters) - Weak U.S. economic data and disappointing auto sales numbers drove Wall Street down on Tuesday, further dragging on global equity prices after the approval of a fiscal stimulus package by Japan's cabinet failed to cheer markets.

Data showing muted U.S. inflation hit the U.S. dollar, which dropped to a six-week low against a basket of currencies, while persistent worries of a supply glut sent U.S. crude prices back below $40 a barrel.

Wall Street suffered its worst day in nearly a month after data indicated inflation was still below the Federal Reserve's 2 percent target, raising doubts about the chances of a near-term rise in U.S. interest rates.

"People are starting to see that things aren’t quite as rosy as they might have thought in the month of July with that big run-up," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

The S&P 500 climbed 3.6 percent in July, its strongest month since March. The dip in U.S. stocks weighed on the MSCI's world stocks index, which was down 0.65 percent.

The index, which tracks shares in 45 countries, added to losses suffered earlier in the session after Japan's approval of 13.5 trillion yen ($132 billion) in fiscal measures failed to boost investor sentiment.

The Dow Jones industrial average fell 90.74 points, or 0.49 percent, to close at 18,313.77, the S&P 500 lost 13.81 points, or 0.64 percent, to end at 2,157.03 and the Nasdaq Composite dropped 46.46 points, or 0.9 percent, to finish at 5,137.73.

Shares of Ford and General Motors both fell more than 4 percent after the two U.S. automakers reported disappointing July vehicle sales.

European stocks dropped to a three-week low, dragged down by banks, as Commerzbank's shares slid to a record low after the bank warned its earnings would fall this year.

Europe's broad FTSEurofirst 300 index closed down 1.33 percent at 1,321.31.

In currency markets, the dollar fell against a basket of currencies, pressured by expectations the Fed would delay raising interest rates. The dollar index was down 0.65 percent at 95.094.

Against the yen, the dollar was down 1.44 percent to 100.91 yen, after touching a three-week low.

Oil prices fell and dragged U.S. crude below $40 a barrel as persistent worries of a glut offset the boost from a weaker dollar.

Brent crude settled down 34 cents, or 0.81 percent, at $41.80 a barrel, while U.S. crude settled down 55 cents, or 1.37 percent, at $39.51.

U.S. Treasury yields rose after Japan unveiled fiscal stimulus measures, dampening demand for U.S. government debt and sending long-dated U.S. yields to their highest in more than a week.

U.S. 30-year yields rose the most among U.S. Treasuries and hit 2.332 percent, their highest since July 21, before pulling back. U.S. 30-year yields were last at 2.300 percent, compared to 2.237 percent late Monday.

Benchmark 10-year yields hit a six-day high of 1.573 percent, but were last at 1.554 percent.

Spot gold prices were up 0.80 percent to $1,363.80 an ounce.

(Additional reporting by Chuck Mikolajczak; Editing by Meredith Mazzilli and James Dalgleish)