Wall Street traders remained focused on whether Washington will raise the debt ceiling and avoid a historic default, with stocks and bonds both falling.

The Dow Jones Industrial Average fell 1%, trailing other major indices. Yields rose across the US curve, with the 30-year note yield rising to around 3.9% - the highest since the run-up to the banking turmoil that erupted in early March - in the aftermath of Pfizer's $31 billion debt sale.

Biden began talks with House Speaker Kevin McCarthy on Tuesday, as Washington leaders race to reach a budget agreement and avoid a US default. The White House meeting comes amid indications that negotiators are struggling to find common ground, with entrenched disagreements over the size and scope of concessions needed to raise the federal spending limit.

Fed's Mester stated that the central bank is powerless to affect long-term economic growth, but it can "do its part" by curbing prices. Her Richmond counterpart, Thomas Barkin, said he was still not convinced that inflation had been defeated and that he would support further rate hikes if necessary.