Wall Street ended a choppy trading session lower on Thursday, as investors grappled with escalating trade tensions and rising oil prices.
Comments by US President Donald Trump that China "has become very spoiled on trade," cast doubt on his efforts to avoid a tariff war between the world's two largest economies, increasing investor jitters at the outset of a second round of high-level negotiations.
"I think this trade mess is certainly affecting the mood," said Jim Bell, president chief investment officer Bell Investment Advisors in Oakland, California.
"This is becoming very real, American businesses are suffering," Mr Bell said. "The trouble with tariffs, is they're always bad, they always increase the costs of almost everything for consumers and they destroy more jobs than they create."
Unrest in the Middle East suggested a reduction of oil supply and sent crude prices to their highest level in three-and-a-half years. The S&P Energy index was up 1.3 per cent, the largest gains of the major S&P 500 sectors.
US small-cap stocks fared better than their larger rivals. The Russell 2000 index closed at a record high for a second day in a row, while larger firms with more international exposure were pressured by rising oil prices and a strengthening dollar.
"Small companies are not as exposed to international trade dynamics," said Mr Bell.
Economic reports showed US unemployment rolls dropping to their lowest level since 1973 and mid-Atlantic manufacturers asking higher prices for their products. The tightening labour market conditions and firming inflation bolster the likelihood of a Federal Reserve rate hike next month.
US 10-year Treasury yields closed at 3.1131 per cent, maintaining their near seven-year high and pressuring rate-sensitive sectors as investors ponder whether bonds offer an attractive alternative to riskier equities.
The Dow Jones Industrial Average fell 54.95 points, or 0.22 per cent, to 24,713.98, the S&P 500 lost 2.33 points, or 0.09 per cent, to 2,720.13 and the Nasdaq Composite dropped 15.82 points, or 0.21 per cent, to 7,382.47.
So-called defensive stocks were among the worst performer among the 11 major sectors of the S&P 500. Rate-sensitive telecom, real estate and utility shares were down in the face of increasing US government bond yields.
Cisco Systems' stock was the biggest drag on the S&P 500 and the Nasdaq, falling 3.8 per cent despite beating profit and revenue estimates in its post-market earnings report. In a research note, Citigroup said investor perception is that the technology company is losing market share.
The S&P 500 technology sector was down 0.5 per cent.
Walmart shares were down 1.9 per cent. Walmart said profit margins remained under pressure due to price cuts and higher freight costs, weighing on its shares even as sales and earnings came in stronger than expected..
Advancing issues outnumbered declining ones on the NYSE by a 1.15-to-1 ratio; on Nasdaq, a 1.52-to-1 ratio favoured advancers.
The S&P 500 posted 26 new 52-week highs and four new lows; the Nasdaq Composite recorded 149 new highs and 30 new lows.
Volume so far on US exchanges was 6.37 billion shares, compared to the 6.65 billion average for the full session over the last 20 trading days.