The Dow dipped two-tenths of a percent, the S&P 500 shed four-tenths and the Nasdaq lost nearly six-tenths.
The ADP National Employment report showed private payrolls increased less than expected in November which could help the Fed bring down inflation.
While investors often cheer such news, Chris Carey, Portfolio Manager at Carnegie Investment Counsel, says this week they're focused more on Friday's non-farm payrolls report for November - which should offer even greater clarity on the Fed's monetary policy path.
"We saw in the October release that we had a much better number than expected, and I think that was mainly one of the bigger drivers that has caused the recent rally that we've seen this quarter. I think that if we continue to get another number below 200,000, and that's going to come right before the Feds meeting, the final meeting for the year. I think the market is expecting that we will see a third hold in terms of what the FOMC is planning to do. But until then, I think the market is just waiting with bated breath to see what that report will show and how that will dictate Fed policy at the next meeting."
Declines in energy stocks also weighed on the major indexes, with oil prices dropping 4% as a larger-than-expected rise in U.S. gasoline inventories exacerbated worries about fuel demand.
Megacaps also declined, with Nvidia losing more than 2%, while Amazon shed more than 1%.
In other company news, tobacco giants Altria Group and Philip Morris slipped 2.8% and 1.6%, respectively, after UK peer British American Tobacco said it will take a $31.5 billion hit from writing down the value of some U.S. cigarette brands.
And Campbell Soup rallied 7% after the food seller beat quarterly profit expectations, helped by higher prices for its packaged meals and snacks.