In economic news, import prices declined a more-than-expected 0.5 percent in October, while export prices fell 0.2 percent.
"The Fed is going to have to be super careful in raising rates in December if data continues to be soft," said Peter Cardillo, chief market economist at Rockwell Global Capital.
U.S. small business optimism was unchanged at 96.1 in October, with hiring stagnant even as more owners expected higher sales and more planned to make capital outlays, the National Federation of Independent Business said.
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Wholesale inventories rose 0.5 percent in September, the largest gain in 3 months.
"Generally the drift of the market is still lower on the prospect of higher, short-term rates," said Jack Ablin, chief investment officer at BMO Private Bank. "This has been a market that's been fueled by easy money."
The Treasury Department auctioned $24 billion of 10-year notes at a high yield of 2.304 percent.
Treasury yields held lower, with the 10-year yield near 2.33 percent and the 2-year yield around 0.87 percent. On Monday, the 10-year yield hit 2.377 percent, its highest level since July 21.
The U.S. dollar traded at its highest level since April against major world currencies. The euro was slightly weaker near $1.071 after hitting its lowest level since April 23. The yen held near 123.21 yen against the greenback.
Investors also awaited scheduled afternoon remarks from the Chicago Fed's Charles Evans, a dovish member of the Federal Open Market Committee (FOMC).
Earlier on Tuesday, the Federal Reserve Bank of Minneapolis named former Treasury official Neel Kashkari as its new president and chief executive officer, effective the beginning of next year.
Separately, Reuters reported that current Minneapolis Fed President Narayana Kocherlakota said in an emailed statement he will not participate in the Fed's December meeting. The Fed's most dovish policymaker is not a voting member of the FOMC.
Before the opening bell, the International Energy Agency (IEA) forecast the price of oil would reach just $80 per barrel by 2020, "with further increases in price thereafter."
Crude oil settled up 0.78 percent at $44.21 a barrel but is still down about 5 percent since the beginning of November.
"There's no doubt this recent downslide in oil prices is global deflation and the (stronger) U.S. dollar," said John Caruso, senior market strategist at RJO Futures.
Separately, Moody's said the world economy's ability to fight any future shocks would be hampered by years of ultra-low interest rates and high-profile liquidity injections.