The S&P 500 and Nasdaq have ended lower after hitting record highs earlier in the session, with investors digesting a jump in consumer prices in June and earnings from JPMorgan and Goldman Sachs that kicked off the quarterly reporting season.
The S&P 500 and Nasdaq reached fresh record highs but quickly fell into negative territory after an auction of 30-year Treasuries showed less demand than some investors expected and pushed yields higher.
Data indicated US consumer prices rose by the most in 13 years last month, while so-called core consumer prices surged 4.5 per cent year over year, the largest rise since November 1991.
Economists viewed the price surge, driven by travel-rated services and used cars, as mostly temporary, aligning with Federal Reserve Chair Jerome Powell's long-standing views.
"Any time you get an uptick in interest rates the stock market is going to get nervous, especially on a day like today," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
The S&P 500 growth index dipped 0.05 per cent while the value index fell 0.70 per cent.
"With growth outperforming value, the takeaway is clearly that inflation from a market perspective is not a real threat in the long term," said Keith Buchanan, a portfolio manager at GLOBALT Investments in Atlanta, Georgia.
Ten of the 11 major S&P 500 sector indexes ended lower, with real estate, consumer discretionary and financials each down more than 1.0 per cent.
JPMorgan Chase & Co stock fell 1.5 per cent after the company reported blockbuster quarterly profit growth but warned that the sunny outlook would not make for blockbuster revenues in the short term due to low interest rates.
Goldman Sachs Group Inc dipped 1.2 per cent after its quarterly earnings exceeded forecasts.
Citigroup, Wells Fargo & Co and Bank of America were due to report their quarterly results early on Wednesday.
PepsiCo Inc gained 2.3 per cent after raising its full-year earnings forecast, betting on accellerating demand as COVID-19 restrictions continue to ease.
June-quarter earnings per share for S&P 500 companies are expected to rise 66 per cent, according to Refinitiv data, with investors questioning how long Wall Street's rally would last after a 16 per cent rise in the benchmark index so far this year.
All eyes now turn to Fed Chair Jerome Powell's congressional testimony on Wednesday and Thursday for his comments about rising price pressures and monetary support going forward.
The Dow Jones Industrial Average fell 0.31 per cent to end at 34,888.79 points while the S&P 500 lost 0.35 per cent to 4,369.21 and the Nasdaq Composite dropped 0.38 per cent to 14,677.65.
Conagra Brands Inc dropped 5.4 per cent after the packaged foods company warned that higher raw material and ingredient costs would take a bigger bite out of its profit this year than previously estimated.
Boeing Co fell 4.2 per cent after the US Federal Aviation Administration said late on Monday some undelivered 787 Dreamliners have a new manufacturing quality issue.
Declining issues outnumbered advancing ones on the NYSE by a 2.85-to-1 ratio; on Nasdaq, a 3.06-to-1 ratio favoured decliners.
The S&P 500 posted 39 new 52-week highs and no new lows; the Nasdaq Composite recorded 61 new highs and 73 new lows.
Volume on US exchanges was 9.5 billion shares compared with the 10.5 billion average for the full session over the last 20 trading days.