Wall Street's main indexes fell on Wednesday with growth stocks under renewed pressure as bond yields climbed ahead of minutes from the Federal Reserve's July meeting, while weak results from Target dragged the retail sector lower.
Retail earnings have been mixed so far this week, with Target Corp falling 2% after reporting a 90% fall in quarterly earnings as its inflation-hit customers reined in spending on discretionary goods.
The S&P 500 retail sector declined 1.2%, after jumping 1.9% in the previous session on encouraging quarterly earnings from Walmart Inc and Home Depot Inc.
Data showed U.S. retail sales were unchanged in July as declining gasoline prices weighed on receipts at service stations. However, consumer spending appeared to be holding up, which could further assuage fears that the economy was already in recession.
"We have to see a true decrease in inflation," said Brian Overby, a senior markets strategist at Ally. "The retail market space, since earnings came out this week, isn't confirming the fact that inflation has peaked."
High-growth and technology stocks such as Amazon.com Inc and Nvidia Corp fell nearly 2% each as U.S. Treasury yields rose for the second straight session.
Nine of the 11 major S&P 500 sectors declined in early trading, with communication services and consumer discretionary stocks leading losses.
At 09:51 a.m. ET, the Dow Jones Industrial Average was down 194.64 points, or 0.57%, at 33,957.37, the S&P 500 was down 34.07 points, or 0.79%, at 4,271.13, and the Nasdaq Composite was down 152.85 points, or 1.17%, at 12,949.70.
Focus was on the release of minutes of the U.S. Federal Reserve's July meeting that could give clues about the size of further interest rate hikes after policymakers were adamant they will keep raising rates until inflation is under control.
Traders see a near equal chance of a 50 basis-point and a 75 basis-point hike by the Fed in September.
The benchmark S&P 500 has recovered nearly 17% from its mid-June lows, with the latest boost coming from expectations that inflation has peaked after softer-than-expected data earlier this month.
Stronger-than-expected corporate earnings have also helped fuel a rebound for U.S. stocks this quarter, but some investors are pointing to potential risks ahead for profits that could sap momentum.
Home improvement chain Lowe's Cos Inc rose 1.2% on posting a better-than-expected quarterly profit.
Declining issues outnumbered advancers for a 6.27-to-1 ratio on the NYSE and a 3.91-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and 29 new lows, while the Nasdaq recorded 13 new highs and 18 new lows.
(Reporting by Bansari Mayur Kamdar and Devik Jain in Bengaluru; Editing by Shounak Dasgupta)