US stocks closed lower on Wednesday as markets grappled with a mixed picture involving resilient retail sales but a gloomier outlook for the holiday season.

The Dow Jones Industrial Average slipped 0.1 percent to finish the session at 33,553.

The S&P 500 dipped 0.8 percent to 3,958, and the Nasdaq Composite Index tumbled 1.5 percent to 11,183.

The slump came after major US retailer Target reported weaker-than-expected third quarter profits, citing an "increasingly challenging environment" as American households were squeezed by soaring inflation.

Target shares plunged 13.1 percent after it warned of a softer holiday season, which weighed on other merchants as well.

"The focus is on retail earnings and more importantly on the strength of the consumer going forward," said Adam Sarhan of 50 Park Investments.

US retail sales data on Wednesday suggested resilience in consumer spending despite price pressures, but there was a slight dip in discretionary segments such as electronics and appliance stores.

But Sarhan said "Investors care about the future. They want to see if the consumer is able to continue to consume in the face of high inflation and higher interest rates."

Meanwhile, Federal Reserve Governor Christopher Waller said he was "comfortable" considering a slower pace of interest rate hikes given recent signs of easing inflation and a slowing economy, although more increases are still needed.

But even with a smaller, half-point step at the Fed's December policy meeting -- following four straight three-quarter point hikes -- he cautioned that "this would still be a very significant tightening action." (AFP)