Wall Street stocks retreated on Tuesday as markets digested major merger announcements and monitored US-China trade talks ahead of big tech earnings later in the week.

Representatives from Beijing and Washington signalled further talks were likely following a round of negotiations in Stockholm. But a top US trade official stressed that President Donald Trump would make any "final call."

Meanwhile investors digested several significant earnings reports, as well as merger announcements in the rail and energy sectors ahead of major economic news catalysts later in the week.

"After reaching all time highs, markets are going to take a wait and see attitude," said Art Hogan of B Riley Wealth Management.

The Dow Jones Industrial Average finished down 0.5 percent at 44,632.

The broad-based S&P 500 shed 0.3 percent to 6,370, while the tech-rich Nasdaq Composite Index declined 0.4 percent to 21,098.

Both the S&P 500 and Nasdaq had finished at records on Monday.

Steve Sosnick of Interactive Brokers described Tuesday's activity as a "little bit of position squaring ahead of a potentially very volatile few days."

Besides earnings from Apple, Facebook parent Meta and other tech giants, markets will absorb a Federal Reserve interest rate decision.

The central bank is expected to keep rates unchanged, but could hint that an interest rate cut will be more likely in September. Trump has lambasted Fed chair Jerome Powell for not cutting interest rates.

The market will also receive key economic reports on the labor market, inflation and US growth.

Among companies reporting earnings on Tuesday, Boeing dropped 4.3 percent, UnitedHealth Group sank 7.4 percent and Whirlpool dived 13.4 percent

Union Pacific announced it will be acquiring Norfolk Southern for US$85 billion, creating a transcontinental railroad intended to boost freight rail efficiency. (AFP)