The Dow Jones Industrial Average was down 15.66 points (0.12 percent) at 12,862.47 at 1040 GMT, extending two days of losses.

The S&P 500-stock index dropped 2.81 (0.20 percent) to 1,396.13, while the Nasdaq Composite shed 5.49 (0.18 percent) at 2,962.30.

Opening stock losses accelerated sharply after weaker-than-expected housing data, showing new-home sales fell slightly in October, but they were quickly pared.

"Following the solid losses yesterday amid an afternoon flare-up in uncertainty regarding a meaningful resolution of the US fiscal cliff, losses for the equity markets are continuing," Charles Schwab & Co. analysts said.

Wall Street was keeping an eye on the White House, where President Barack Obama and Vice President Joe Biden were to meet with top business leaders to discuss the budget negotiations.

Investors also awaited the Federal Reserve's Beige Book report, a snapshot of current economic conditions, due at 2:00 pm (1900 GMT).

Financials were weaker. JPMorgan Chase was among the Dow laggards, down 1.2 percent, and Bank of America lost 1.3 percent.

Discount retailer Costco surged 4.8 percent after announcing a jump in same-store sales in November and plans to issue a special $7 cash dividend per share on December 18, joining a rash of companies aiming to avoid higher dividend taxes expected to come from US deficit-slashing negotiations.

Struggling Knight Capital soared 16.8 percent after high-frequency trader Getco offered to buy it for $539 million.

On Tuesday, the Dow and the S&P 500 fell for the second day in a row, with the S&P broad-market index down 0.5 percent.

Bond prices climbed. The 10-year US Treasury yield fell to 1.61 percent from 1.65 percent late Tuesday, and the 30-year dropped to 2.75 percent from 2.79 percent.

Bond prices and yields move inversely.