Wall Street's main indexes fell on Tuesday as investors booked profits from post-election gains and awaited U.S. inflation data due in the coming days.
The three major indexes had rallied to record highs since the Nov. 5 U.S. election as investors bet on a boost to equities from President-elect Donald Trump's proposed tax cuts and the prospect of easier regulatory policies.
But investor enthusiasm was dampened on Tuesday. European shares lost 2% as European Central Bank policymakers warned that increased tariffs from Trump would hamper global growth.
Some of the stocks expected to perform well under Trump gave back gains. Shares in electric car maker Tesla were down close to 5% after rising nearly 40% since the election results.
The small-cap Russell 2000 index fell 1.5% after closing at a three-year high on Monday.
Russell Price, chief economist at Ameriprise Financial, said the decline in stocks overseas pressured U.S. stocks, along with profit-taking after the rally and ahead of inflation data.
"When we opened up already experiencing some downside with the very strong run that we've had, investors tend to look to take some profits just in case stocks continue to slide," Price said.
On investors' radar is Wednesday's consumer price inflation data, followed by producer prices inflation and retail sales data this week, that are expected to provide clues about the U.S. Federal Reserve's policy path going forward.
The data presents a near-term risk to investments, said Price. "It very likely is contributing to a little bit of the downside that we're seeing today."
At 2:31 p.m., the Dow Jones Industrial Average fell 230.63 points, or 0.52%, to 44,062.50, the S&P 500 lost 6.20 points, or 0.10%, to 5,995.15 and the Nasdaq Composite lost 3.25 points, or 0.02%, to 19,295.51.
Among the S&P 500's 11 major industry sectors, materials and utilities led declines with more than 1% losses while consumer staples was among the biggest gainers.
Markets have already dialed back expectations for interest-rate reductions over the next year, given strong economic data and the possible inflationary impact of some Trump policies.
Richmond Fed President Thomas Barkin said on Tuesday that the U.S. central bank is ready to respond if inflation pressures rise or the job market weakens.
The blue-chip Dow was weighed down by declines in healthcare and financial stocks, including UnitedHealth and Goldman Sachs, both off around 1%.
Biotech firm Novavax dropped 5.8% after cutting its annual revenue forecast due to lower-than-expected sales of its COVID-19 vaccine.
Honeywell hit a record high and was last up 3% after activist investor Elliott Investment said it has built a stake worth more than $5 billion in the industrial conglomerate.
Declining issues outnumbered advancers by a 3.25-to-1 ratio on the New York Stock Exchange where there were 281 new highs and 91 new lows.
On the Nasdaq, 1,350 stocks rose and 2,885 fell as declining issues outnumbered advancers by a 2.14-to-1 ratio. The S&P 500 posted 51 new 52-week highs and 15 new lows while the Nasdaq Composite recorded 177 new highs and 109 new lows. (Reporting by Sinéad Carew in New York, Lisa Mattackal and Purvi Agarwal in Bengaluru; Editing by Shounak Dasgupta and Rod Nickel)