The Dow shed 1.3%, while the S&P 500 and Nasdaq each lost one-and-a-half percent.

During the session, the S&P got within half a percent of its all-time closing high. Reaching a new closing high would have confirmed the benchmark index had been in a bull market since hitting its bear market floor in October of 2022. The index is now more than 2% below its record closing high.

Stocks have rallied on the back of the Fed last week signaling it had reached the end of its tightening cycle, while opening the door for rate cuts in the coming year. Still, Ross Mayfield, Investment Strategy Analyst at Baird, suggests caution for 2024.

"We still think that even if the Fed is cutting rates, the floor under rates is much higher than it was in the previous cycle. That raises the bar for company performance and profitability. I think sticking with the quality tilt, across sector, across asset class - whether in fixed income or equities - is going to be something that's really important over the next couple of years."

In company news, shares of General Mills slid more than 3.5% after the packaged food company cut its sales forecast.

FedEx shares slid 12% after the delivery firm missed quarterly profit estimates and cut its full-year revenue forecast. Rival UPS dipped 3%.

Alphabet gained more than 1% after the company announced it was restructuring Google's ad sales unit.

And memory chipmaker Micron Technology, which closed down more than 4%, gained 5% in after-hours trading after forecasting quarterly revenue above Wall Street estimates.