The Dow Jones Industrial Average closed down 33.84 points, or 0.2%, at 17,511.34, after being off as many as 59 points.
The Standard & Poor’s 500 index slipped 5.52 points, or 0.3 percent, to 2,096.92. The sell-off followed Beijing’s efforts to ban major shareholders from selling stocks.
Shanghai stocks dropped 6.15 percent on Tuesday, with the benchmark Composite Index losing 245 points and marking the hardest fall in three weeks. Housing starts rose 0.2% in July from a month earlier to an annual rate of 1.21 million.
MSCI’s broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS was down 1.2 percent after hitting its lowest since July 2013.
“The housing market looks poised to remain on solid footing heading into the second half of 2015, ahead of the Fed’s possible interest rate increase that could come by year end”, said Sophia Kearney-Lederman, an analyst at FTN Financial.
The top performers on the S&P 500 were TJX Companies Inc (NYSE:TJX) which rose 7.22% to 76.78, Ross Stores Inc (NASDAQ:ROST) which was up 3.72% to settle at 56.53 and Patterson Companies Inc (NASDAQ:PDCO) which gained 3.10% to close at 51.55.
Concerns over China have also ramped up in recent weeks, rippling across markets tied to Chinese growth. The headline general business conditions index tumbled 19 points to minus 14.9, its lowest level since 2009 and well below the market consensus of a 4.75 percent gain, said the New York Fed.
In commodity markets, gold futures were down 0.7% at $1,109.80 an ounce.
The US housing data on Tuesday added to good employment, retail sales, and industrial output data recently in suggesting the economy got off to a strong start in the third quarter.
A 6.0 percent tumble in Chinese shares on Tuesday, and weak earnings from Wal-Mart pressured US stocks and copper prices saw six year lows.
The yield on the 10-year Treasury note drifted up to 2.188% from 2.150% on Monday.