Losses at technology and health care companies helped pull stocks lower Tuesday, snapping the Dow Jones industrial average's eight-day winning streak.
Bond prices fell. The yield on the 10-year Treasury rose to 2.99 percent.
That paves the way for higher borrowing costs on mortgages.
Bond prices fell, sending yields higher, after the government reported a solid increase in US retail sales last month.
The Dow Jones industrial average gained 68 points, or 0.3 percent, to 24,899.
In small-caps, the Russell 2000 closed at 1,600.34 with no change.
The market slide comes in the midst of a strong May for stocks.
The S&P 500 fell 18 points, or 0.7 percent, to 2,711. The Nasdaq composite fell 60 points, or 0.8 percent, to 7,349.
"A little bit of today's jitters are related to a hangover to yesterday's wrongly placed exuberance that a trade deal was imminent, and the reality is we are in for a long slugfest between the USA and China", said Jon Mackay, investment strategist at Schroders North America in NY. Home Depot beat earnings expectations but missed on same-store sales in the first quarter.
Banks bucked the downward trend Tuesday and rose along with bond yields. Some Fed-watchers have been cautioning that any lasting uptick in inflation or economic growth might spur the Fed to pursue an additional rate increase before year's end. At 3.08% earlier today, it was the highest yield since July 2011. Higher mortgage rates can make it harder for would-be buyers to purchase a home.
Some banks got a boost from the higher rates, which make loans more profitable. KeyCorp rose 1.5 percent.
Viacom slumped 6 percent and CBS rose 4 percent after CBS sued to block efforts to force the company combine with Viacom. Sectors leading losses for the day included real estate, health care and technology.
ENERGY: Benchmark U.S. crude oil gave up 15 cents to $71.16 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price global oil, added shed 8 cents to $78.35 a barrel in London. The euro weakened to $1.1847 from $1.1944.
Apple fell 1 percent, Amazon fell 1.9 percent and Wells Fargo climbed 0.9 percent. Silver dropped 38 cents, or 2.3 percent, to $16.27 an ounce. Williams said he thought the "new normal" for the neutral rate was around 2.5% (he added that he didn't expect the fiscal stimulus to have any more than a 0.25% impact on neutral) while Kaplan put it in a range of 2.5-3%. Natural gas dipped a penny to $2.84 per 1,000 cubic feet. Hong Kong's Hang Seng dropped 1.2 percent.