At 09:46 a.m. ET, the Dow Jones Industrial Average .DJI fell 142.45 points, or 0.27%, to 51,721.24, the S&P 500 .SPX lost 20.66 points, or 0.27%, to 7,743.98 and the Nasdaq Composite .IXIC lost 114.33 points, or 0.41%, to 27,133.38.
In the previous session, the tech-heavy Nasdaq notched its first intraday record high since early June, as optimism around AI remains a dominant theme on Wall Street.
But markets pulled back on Wednesday, and traders are now awaiting updates from US and Iranian officials after their mediators commenced negotiations on the sidelines of the UN General Assembly on Tuesday.
Chinese President Xi Jinping is expected to arrive in Washington later in the day on a state visit. The agenda includes extending the trade truce reached last year between the two superpowers, AI regulation and US arms sales to Taiwan.
He is also expected to meet several top executives, including those from General Motors GM.N, Meta META.O, Apple AAPL.O, Amazon AMZN.O and Tesla TSLA.O.
Federal Reserve Governor Michael Barr is expected to speak later in the day and his remarks will be scrutinized for clues on the policy outlook.
Increasing AI spending and higher energy costs from the US-Iran war have led policymakers at the Federal Reserve to flag the need to keep interest rates restrictive for longer, following last week's decision to hike rates.
Traders are now pricing in a 50% chance that interest rates could be hiked by at least 25 basis points next month, the CME Group's FedWatch Tool showed.
A survey, meanwhile, showed US business activity raced to a more than five-year high in September.
On the earnings front, casual dining chain Cracker Barrel CBRL.O added 3.8% after beating fourth-quarter sales estimates.
Paychex PAYX.O dropped 5.4% after the HR and payroll services provider said that its largest segment missed first-quarter revenue estimates.
Declining issues outnumbered advancers by a 3.26-to-1 ratio on the NYSE and by a 2.62-to-1 ratio on the Nasdaq.
The S&P 500 posted 12 new 52-week highs and 24 new lows, while the Nasdaq Composite recorded 17 new highs and 55 new lows.
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