"When you look at financial conditions, they are still pretty good," said Quincy Krosby, chief market strategist at Prudential Financial. "However, the market has been looking for a reason to pull back by year-end."
"So, you have that tug of war in the market," Krosby said.
The Nasdaq composite, meanwhile, closed 0.5 percent lower as tech stocks fell broadly. Apple, Netflix and Alphabet were among the big-name tech stocks that were trading lower on Wednesday. Tech has had a stellar year, helping lift the Nasdaq 24 percent higher in 2017. The S&P and Dow are also up sharply for the year.
"By most measures tech has been overvalued for some time now. It doesn't necessarily take an event to make it behave like this," said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "At the end of the day consumer discretionary is 14 percent Amazon. Amazon is really selling off in the context of the tech basket."
"Until proven otherwise, the market's taken a kind of 'show me' position," added Luschini.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, hit 14.34, its highest level since Aug. 29 on Wednesday. But the index gave back some of its gains to trade at 13.29.
On Wednesday, House Speaker Paul Ryan told CNBC's "Squawk Box" that the House will not repeal the Obamacare individual mandate before the Senate does.
A revised version of the Senate's tax plan includes a measure that effectively repeals a law requiring most Americans to buy health insurance or pay a tax penalty. The House is also set to vote on its own tax bill on Thursday.
"If the [House] bill gets voted down, that could accelerate this pullback," said John Serrapere, director of research at Arrow Funds. "The last four days have been mostly down days for the different S&P sectors."
Equities took a small leg lower later on Wednesday after Republican Sen. Ron Johnson announced his opposition to the Senate tax plan as currently written.
The Wisconsin legislator is the first GOP senator to voice explicit opposition to the proposal; Johnson's objection stems from his feeling that the plan disproportionately favors corporations, according to The Wall Street Journal.
U.S. equities have eased from record highs lately as investors gauge the likelihood of a tax-reform plan becoming law before year-end. For the month, the major averages are down about 1 percent. The S&P 500 and Dow are also on the verge of snapping a seven-month winning streak, while the Nasdaq was on track to post its first monthly loss in four months.
In economic news, retail sales rose 0.2 percent last month. Economists polled by Reuters expected them to remain unchanged. Meanwhile, the consumer price index edged up 0.1 percent in October, in line with expectations.
Treasury yields slipped after the data were released. The 10-year yield fell to 2.33 percent, while the short-term two-year yield traded near 1.69 percent. In fact, the spread between the two and 10-year yields hit its lowest level in 10 years earlier in the session.
Chris Molumphy, chief investment officer at Franklin Templeton's Fixed Income Group, said the tightening in the spread was not driven by the inflation data, "but rather a weaker equity market and questions around tax reform."