Stocks fell and Treasury yields jumped on Wednesday after Federal Reserve minutes showed central bankers generally expect economic conditions would support reining-in the Fed's stimulus package of bank asset purchases in the coming months.
Two days after climbing above 16,000 for the first time, the Dow Jones Industrial Average fell 66 points to close unofficially at 15,900.82.
The S&P 500 also ended 6 points lower and the Nasdaq Composite dropped 10 points.
Fed officials anticipate that economic reports would "prove consistent with the committee's outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pact of purchases in coming months," according to the minutes from the Federal Open Market Committee's Oct. 29-30 meeting.
"The market is still expecting a taper next year, not in December of this year," said Dean Junkans, chief investment officer at Wells Fargo Private Bank. "I don't think we got much additional information. They talked a lot about their communication strategy; I think that's appropriate," added Junkans, referring to the market's surprise when the Fed opted not to begin curbing its $85 billion in monthly asset purchases in September.
"Unless we see big upside in the November payroll report, (Janet) Yellen will take the reins in January with current policy on track and she'll decide where to go from there," offered Peter Boockvar, chief market analyst at the Lindsey Group, emailed. Yellen is President Obama's choice to replace Fed Chairman Ben Bernanke.
Regardless, "the U.S. Treasury market is tapering before our eyes... and that should be the focus of equity investors," Boockvar said of 10-year Treasury yields, used to determine mortgage rates and other consumer loans, which climbed 9 basis points to 2.8 percent.
On the New York Mercantile Exchange, gold futures for December delivery lost $15.50, or 1.2 percent, to $1,258.00 an ounce. Crude futures for January delivery dropped four cents to close at $93.85 a barrel.
A Commerce Department report showed retail sales up 0.4 percent last month, beating expectations of a 0.1 percent rise and compared to a 0.1 percent drop the month before.
Separate data from the Labor Department showed the cost of living fell 0.1 percent last month, illustrating less costly fuel, cars and clothing. The core consumer-price index, which excludes food and energy, climbed 0.1 percent.
"The news flow on balance, whether economic data or corporate data, is better than expected; there were a lot of reasons to believe the government shutdown might have impacted the consumer, instead lower energy prices did," said Art Hogan, market strategist at Lazard Capital Markets, referring to the increase in retail sales that coincided with lower energy costs.
Wednesday's economic data showed inflation remained tame, with the October report seen as giving the Federal Reserve room to continue its monthly asset purchases. Another report, this one from the National Association of Realtors, had home resales down 3.2 percent in October.
The housing sector is "taking some of its cues from the 10-year," Hogan said of the benchmark Treasury note, yields of which are used to figure consumer loans including mortgage rates.
"October is not an important month for home sales; people just don't move in the fourth quarter, typically," Hogan added.
Third-quarter numbers from J.C. Penney had the struggling retailer reporting bottom and top-line misses, but positive comments on the company's turnaround had shares rising 8 percent. Lowe's fell after the home-improvement retailer posted third-quarter profit below Wall Street's estimates.
In an interview on Bloomberg TV, St. Louis Fed President James Bullard said a strong November jobs report would increase the odds of the Fed starting to reduce its stimulus in December.
Bloomberg cited two people with knowledge of the discussion in reporting the European Central Bank is considering a negative deposit rate to help the region's economy.
Optimistic remarks from outgoing Federal Reserve Chairman Bernanke had cheered overseas markets ahead of Wall Street's start.
Speaking in Washington on Tuesday night, Bernanke said the central bank would maintain its easy monetary policy for as long as needed, and would only begin to reduce bond-buying once convinced that labor market improvements would continue.