Wall Street lost ground on Tuesday and benchmark Treasury yields continued to climb as mixed economic data, weak results and ongoing uncertainties over debt ceiling negotiations in Washington kept equity buyers on the sidelines.
All three major U.S. stock indexes were in the red, with tech and communications services limiting the Nasdaq's decline.
President Joe Biden and House Speaker Kevin McCarthy were scheduled to meet, with an eye toward reaching an agreement to raise the U.S. debt limit and avoid a catastrophic default.
Meanwhile, disappointing results from Home Depot, combined with weaker-than-expected retail sales data suggested consumer spending is losing some momentum as restrictive monetary policy dampens demand.
"Home Depot numbers were worse than expected, then we ended up with a weaker than expected retail sales report, fueling concerns that the economy is slowing more rapidly than investors would like," said Sam Stovall, chief investment strategist of CFRA Research in New York.
However, a core measure of retail sales suggested the American consumer continues to bolster the economy.
"Right now, markets are jockeying over the next Fed easing cycle," Stovall added. "Wall Street continues to see rate cuts happening in the latter half of this year, and with the Fed being data dependent, (investors are) anticipating the weak data will force the Feds hand."
The Dow Jones Industrial Average fell 239.82 points, or 0.72%, to 33,108.78, the S&P 500 lost 17.52 points, or 0.42%, to 4,118.76 and the Nasdaq Composite dropped 13.36 points, or 0.11%, to 12,351.85.
European shares were lower as the debt ceiling debate and hawkish rhetoric from the European Central Bank stifled investor risk appetite.
The pan-European STOXX 600 index lost 0.52% and MSCI's gauge of stocks across the globe shed 0.37%.
Emerging market stocks rose 0.20%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.07% lower, while Japan's Nikkei rose 0.73%.
U.S. Treasury yields continued to climb on the heels of the Retail Sales data, suggesting that the Fed's efforts to toss cold water on the economy in order to rein in inflation has yet to take full effect.
Benchmark 10-year notes last fell 13/32 in price to yield 3.5546%, from 3.508% late on Monday.
The 30-year bond last fell 30/32 in price to yield 3.8967%, from 3.842% late on Monday.
The greenback edged higher against a basket of world currencies after the weaker-than-expected retail sales data, shifting focus to the partisan debt ceiling wrangling unfolding in Washington.
The dollar index rose 0.07%, with the euro down 0.06% to $1.0865.
The Japanese yen weakened 0.23% versus the greenback at 136.45 per dollar, while Sterling was last trading at $1.2492, down 0.28% on the day.
Oil prices advanced, supported by a higher global demand forecast from the International Energy Agency (IEA).
U.S. crude fell 0.18% to $70.98 per barrel and Brent was last at $75.46, up 0.31% on the day.
Gold prices dipped in opposition to the rising dollar.
Spot gold dropped 0.8% to $2,004.99 an ounce.
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