The S&P 500 and the Nasdaq fell on Tuesday after data showed producer prices increased more than expected in November and ahead of a potential decision on faster tapering from the US Federal Reserve this week.
The fast-spreading Omicron coronavirus variant also tamped down the mood after the S&P 500 index hit an all-time closing high late last week.
Declines were led by megacap technology and communications stocks, with Meta Platforms, Microsoft Corp, Tesla Inc, Alphabet Inc and Amazon.com Inc falling between 0.8% and 3%.
"People are trying to create an environment ... to slow the spread or the severity (of Omicron), but also people who are well and want to participate in the economy. So there's a push and a pull at play here," said Tom Martin, senior portfolio manager at Globalt.
"Investors want to be positioned neutrally till the end of the year. They don't want to do a lot of trading between now and then as long as there's nothing jarring happening."
Apple Inc rose 0.7%, bucking the trend among its heavyweight peers, as it stayed on track to become the world's first $3 trillion company in market value.
Data from the Labor Department showed the producer price index (PPI) for final demand in the 12 months through November shot up 9.6%, clocking its largest gain since November 2010 and followed an 8.8% increase in October.
Seven of the 11 major S&P 500 sector indexes rose, with financials gaining 0.7% as investors expected a hawkish tone from the Fed at the end of its two-day meeting on Wednesday.
Oil edges up towards $75, Omicron concerns dominate
The US central bank will likely signal a faster wind-down of asset purchases, and thus, a quicker start to interest rate hikes in order to contain the rapid rise in prices.
A Reuters poll of economists sees the central bank hiking interest rates from near zero to 0.25-0.50% in the third quarter of next year, followed by another in the fourth quarter.
"The central bank is set to announce an acceleration of tapering from January 2022, with consensus expecting the pace to double in speed, in order to counter inflation," Lukman Otunuga, senior research analyst at FXTM, wrote in a client note.
"Traders are currently pricing in a 73% probability of at least one rate hike by early May 2022 and fully pricing a 25-basis point hike by mid-June 2022."
At 9:48 a.m. ET the Dow Jones Industrial Average was up 28.96 points, or 0.08%, at 35,679.91, the S&P 500 was down 19.90 points, or 0.43%, at 4,649.07 and the Nasdaq Composite was down 149.93 points, or 0.97%, at 15,263.35.
The blue-chip Dow index edged higher on gains in Goldman Sachs and UnitedHealth Group.
Beyond Meat firmed 6.7% after Piper Sandler upgraded the plant-based meat maker's stock to "neutral" from "underweight".
Declining issues outnumbered advancers for a 1.35-to-1 ratio on the NYSE and for a 1.99-to-1 ratio on the Nasdaq.
The S&P index recorded 10 new 52-week highs and two new lows, while the Nasdaq recorded 11 new highs and 179 new lows.