The benchmark S&P 500 and the Nasdaq fell on Thursday after weak US manufacturing data raised concerns about the health of the economy, with comments from Fed officials dampening hopes of future interest rate cuts.
A private survey showed US manufacturing activity in August contracted for the first time in almost a decade, signs that factories are suffering from a global slowdown amid an escalating US-China trade war.
Yields on the US two-year Treasury notes again moved above those of 10-Year bonds in response to the disappointing data.
"It's a very quiet market and you have to bear with it for the short term," said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.
"I don't see a near term recession but looking at a year from now, it could be possible ... If the (yield curve) inversion continues into September and into October then it's something to be more mindful about."
Adding to weak sentiment, President of Philadelphia Fed Patrick Harker said he does not see the case for additional stimulus.
Kansas City Federal Reserve Bank President Esther George, a policymaker with a vote on the Fed's policy-setting panel this year, also said she does not yet see a signal of a downturn in the US economy.
Their comments come ahead of a highly anticipated speech by Fed Chairman Jerome Powell on Friday at an annual gathering of central bankers in Jackson Hole, Wyoming.
Despite the stock market stabilizing from a selloff earlier this month, investors are wary about how far policymakers are willing to cut rates and Powell's remarks may prove crucial to short-term sentiment.
At 12:29 p.m. ET, the S&P 500 was down 4.62 points, or 0.16pc, at 2,919.81 and the Nasdaq Composite was down 39.35 points, or 0.49pc, at 7,980.86.
The Dow Jones Industrial Average was up 44.95 points, or 0.17pc, at 26,247.68, lifted by shares of Boeing Co.
Boeing rose 4.1pc as Reuters reported that the planemaker is looking to increase production of its grounded 737 MAX jets as early as October, suggesting the aircraft's return to service was on track in early fourth quarter.
Six of the 11 major S&P sectors were lower with a 0.55pc decline in technology weighing the most on the benchmark index.
Bank stocks, which tend to perform better in higher interest rate environment, rose 1pc.
Stocks initially opened higher as Nordstrom Inc rose 16.2pc, joining Target Corp and Lowe's Cos Inc this week in delivering a quarterly profit beat and bolstering confidence in consumer demand.
Declining issues outnumbered advancers for a 1.12-to-1 ratio on the NYSE and for a 1.39-to-1 ratio on the Nasdaq.
The S&P index recorded 32 new 52-week highs and four new lows, while the Nasdaq recorded 51 new highs and 46 new lows.