Atlanta Fed President Dennis Lockhart said the recent mixed economic data "do not present a clear picture" for the central bank to determine whether to taper its bond-buying program in September.
Major averages have been treading water in the last two weeks amid uncertainty about when the Fed may start winding down its stimulus program. The Fed's bond-buying policy has been credited with fueling the S&P 500's gain of nearly 20 percent so far this year.
On the economic front, retail sales edged up 0.2 percent in July, according to the Commerce Department, just below expectations for a gain of 0.3 percent.
And import prices rose less than expected in July, gaining just 0.2 percent last month, according to the Labor Department, pointing to benign inflation pressures. Economists polled by Reuters had expected prices to rebound 0.6 percent after four-straight months of declines.
Business inventories were unchanged in June. Economists polled by Reuters expected a gain of 0.2 percent.
Treasury yields jumped, with the benchmark 10-year note gaining 8 basis points to 2.699 percent.
"The story of the morning is bond yields, especially the 10-year," said Art Cashin, director of floor operations at UBS Financial Services. "As it approached 2.7 percent, it cut legs out from under opening rally attempt. Yield rise Monday afternoon followed by more pronounced rise this morning, raises fears that bond vigilantes may be taking the helm from the Fed."
The rise in interest rates hit homebuilders including KBHome, Meritage and Pulte. The iShares Dow Jones US Home Construction Index briefly dipped into negative territory for the year.