04:56 PM EDT, 09/23/2025 (MT Newswires) -- US equities retreated following a three-day advance to all-time highs as Federal Reserve Chair Jerome Powell highlighted a "challenging situation" that the central back faces with respect to its dual mandate.

The Nasdaq Composite shed nearly 1% to 22,573.5, while the S&P 500 fell 0.6% to 6,656.9. The Dow Jones Industrial Average dropped 0.2% to 46,292.8. Among sectors, consumer discretionary saw the biggest drop followed by technology, while energy paced the gainers.

In remarks prepared for a speech on Tuesday in Warwick, Rhode Island, Powell said monetary policymakers face a "challenging situation," with near-term risks to inflation tilted to the upside and those to employment leaning downside.

"If we ease too aggressively, we could leave the inflation job unfinished and need to reverse course later to fully restore 2% inflation," the Fed chair said. "If we maintain restrictive policy too long, the labor market could soften unnecessarily."

Separately, Fed Vice Chair for Supervision Michelle Bowman said recent data indicate that policymakers are at a "serious risk of already being behind the curve" in addressing a weakening labor market.

"Should these conditions continue, I am concerned that we will need to adjust policy at a faster pace and to a larger degree going forward," Bowman said.

On Monday, newly appointed Fed Governor Stephen Miran said the central bank's policy rate should be two percentage points lower than where it currently is, while St. Louis Fed President Alberto Musalem cautioned against further rate cuts.

Last week, the Federal Open Market Committee reduced interest rates by 25 basis points to a range of 4% to 4.25%, noting increased downside risks to employment and signaling further policy easing later in 2025.

"Conflicting headlines of monetary policy being 'too tight' and 'too loose' at the same time underscore the growing divide between those officials increasingly mindful of emerging weakness in the labor market and those voicing ongoing concerns of still-elevated inflation," Stifel Chief Economist Lindsey Piegza said in a note e-mailed to MT Newswires.

The odds of the FOMC again cutting interest rates by 25 basis points next month rose to 92% Tuesday from 90% Monday, according to the CME FedWatch tool.

"While the recent slowdown in topline hiring may have been adequate justification for a 'risk-management'-style rate cut in September, moving policy closer to neutral, the lack of price stability more than three years since the Fed began raising rates in the aftermath of the COVID recession should severely limit, if not entirely retard, further downside potential for rates," Piegza said.

US Treasury yields were lower, with the 10-year rate falling 3.9 basis points to 4.11% and the two-year rate dropping 2.3 basis points to 3.6%.

In economic news, the Organization for Economic Co-operation and Development raised its global and US economic growth forecasts for 2025, saying the macro landscape benefited from front-loading ahead of higher tariffs.

US private-sector output growth hit a three-month low in September amid softening demand, though selling prices rose at the slowest pace since April, according to S&P Global's ( SPGI ) flash purchasing managers' index.

"While growth expectations across both manufacturing and services also continue to be dogged by concerns over the political environment, and especially tariffs, September encouragingly saw business sentiment improve in part due to the anticipated beneficial impact of lower interest rates," S&P Global Market Intelligence Chief Business Economist Chris Williamson said.

West Texas Intermediate crude oil was up 2.2% at $63.66 a barrel in Tuesday late-afternoon trade.

In company news, Sempra ( SRE ) agreed to sell a 45% stake in its energy infrastructure platform to affiliates of investment firm KKR (KKR) and Canada Pension Plan Investment Board in a cash deal worth about $10 billion, as the utility firm aims to simplify its business model and improve earnings growth. Sempra ( SRE ) shares jumped 4.5%, while KKR rose 0.2%.

Nvidia ( NVDA ) fell 2.8%, the second-biggest decliner on the Dow, after a three-day winning streak. The chipmaking giant's $100 billion partnership with Microsoft ( MSFT )-backed (MSFT) OpenAI could raise antitrust concerns, Reuters reported Tuesday, citing experts.

Gold was up 0.6% at $3,797.20 per troy ounce, while silver rose 0.2% to $44.28 per ounce.