The Nasdaq Composite and the S&P 500 have finished lower under pressure from technology stocks while the Dow Jones Industrial Average marked its second straight record close and SpaceX rallied to become the fifth-most valuable US company.
After rallying sharply on Monday on optimism about a US-Iran peace deal, investors in the S&P 500 and Nasdaq took a breather even as oil prices fell to their lowest levels since early March.
Shares of SpaceX finished up 4.8 per cent at $US201.80 after hitting a record high of $US225.64.
The rocket and AI company ended the session with a market value above that of Amazon and briefly surpassed Microsoft's value in morning trading.
While falling oil prices offered some support to equities, Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, said it was too difficult to build on recent steep gains in the heavyweight technology sector without a break.
He noted some investor caution ahead of the US Federal Reserve's policy update due on Wednesday afternoon.
"We had a big move yesterday in the market," said Luschini, alluding to the S&P 500's 1.65 per cent rally on Monday and Nasdaq's advance of more than 3.0 per cent.
"We're just digesting some of those gains and the setup in anticipation of the Fed meeting is always a little tentative."
The Dow Jones Industrial Average rose 328.64 points, or 0.64 per cent, to 51,999.67, the S&P 500 lost 42.94 points, or 0.57 per cent, to 7,511.35 and the Nasdaq Composite lost 307.60 points, or 1.15 per cent, to 26,376.34.
Investors rotated into economically sensitive sectors and sold richly valued technology stocks on Tuesday.
Chip stocks fell sharply after soaring in the prior three sessions.
Of the S&P 500's 11 major industry sectors, seven ended higher.
Financials, up 1.5 per cent, and industrials, up 0.7 per cent, were the leading gainers.
Technology was the biggest laggard, down 2.3 per cent.
The Philadelphia semiconductor index underperformed massively with a 5.7 per cent drop.
US oil futures settled down 5.8 per cent as some details emerged about the US-Iran interim deal, which is expected to extend a tenuous ceasefire announced in April by another 60 days and reopen the Strait of Hormuz, which Iran has effectively blocked since the US and Israel attacked Iran in February.
US President Donald Trump said the agreement would rule out a nuclear weapon for Iran, while a US official said that it allows Iran to sell oil upon signing.
The war had pushed up oil prices since it started in late February, and fanned worries about sticky inflation, which informs the US central bank's policy on interest rates.
Investors are widely expecting the Fed to hold interest rates at its current 3.50 per cent to 3.75 per cent range on Wednesday although they will pay close attention to new Fed chair Kevin Warsh's comments on inflation, unemployment and the economic outlook.
Traders are pricing in the Fed holding rates through much of the year but are betting on a nearly 43 per cent chance of a 25-basis-point rate hike in December, according to CME Group's FedWatch tool.
In individual stocks, shares of Olin sank 5.9 per cent after the chemical producer said it would acquire Huntsman in an all-stock deal valued at $US2.43 billion ($A3.44 billion).
Huntsman shares tumbled 17 per cent as the offer stood at a discount to the stock's recent price.
Yum Brands shares rose 1.9 per cent after the fast-food company said it would sell its Pizza Hut chain for $US2.7 billion as it struggles with stiff competition and cautious consumer spending.
Advancing issues outnumbered decliners by a 1.06-to-1 ratio on the NYSE where there were 338 new highs and 84 new lows.
On the Nasdaq, 1,963 stocks rose and 2,835 fell as declining issues outnumbered advancers by a 1.44-to-1 ratio.
The S&P 500 posted 23 new 52-week highs and three new lows while the Nasdaq Composite recorded 78 new highs and 119 new lows.
On US exchanges, 20.98 billion shares changed hands compared with the 20.84 billion average for the last 20 sessions.
