On the economic front, new home sales jumped 8.3 percent in June to a seasonally adjusted annual rate of 497,000 units, the highest level since May 2008, according to the Commerce Department. Still, the reading was below economists' projections for a 482,000-unit rate. Homebuilders were mostly in the red, dragged by KBHome and Toll Brothers.
Weekly mortgage rates dropped last week for the first time in 2-1/2 months following reassuring comments from Fed Chairman Ben Bernanke, but demand for home loans still declined, according to the Mortgage Bankers Association.
Meanwhile, conditions in the manufacturing sector ticked higher in July to 53.2, hitting a four-month high, according to a report from financial data from Markit. A reading above 50 indicates expansion.
European shares were boosted by better-than-expected flash PMI (purchasing managers' index) data for the euro zone. Euro zone PMI rose to an 18-month high in July. The euro traded higher after the news, hitting a one-month high.
"Encouraging news," wrote Howard Archer, an economist at IHS Global Insight in a note. "With the euro zone purchasing managers surveys supportive to the view that the euro zone has finally stopped contracting and could very well eke out marginal growth over the second half of the year."
However, shares in Asia declined after HSBC's flash estimate of Chinese PMI fell to an 11-month low of 47.7 in July, fueling fears of further slowdown in the world's second-largest economy.
(Read more: Is China about to launch a new round of stimulus?)
Dell gained after founder Michael Dell and Silver Lake raised their bid to $13.75 a share in cash for the PC maker. The company said the special shareholder meeting will be delayed to Aug. 2 while it considers the new offer.
Treasury prices extended their declines after the government auctioned $35 billion in 5-year notes at a high yield of 1.410 percent. The bid-to-cover ratio, an indicator of demand, was 2.46.
