Wednesday's hotly anticipated Consumer Price Index (CPI) is at the top of most investors' minds as they tweak expectations on the timing and extent of the Federal Reserve's rate-cutting phase, following robust economic data such as last Friday's blockbuster employment report.

"The markets are nervous about tomorrow's CPI report and buying protection (amid) a growing perception that it could be an uncomfortably high inflation reading," said Michael Green, chief strategist at Simplify Asset Management in Philadelphia. "The market is moving to hedge itself."

JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc., due to report results on Friday, were the three heaviest drags on the S&P Banking index.

"The financials kick off first-quarter reporting season and often set the tone," said Bill Northey, senior investment director at U.S. Bank Wealth Management, Billings, Montana. "We are looking to the cyclical areas as an indicator of the health of corporate America."

While analysts expect inflation is continuing to meander down toward the U.S. central bank's 2% goal, the National Federation of Independent Business reported on Tuesday that small business optimism touched an 11-year low in March, with inflation as the most pressing concern.

"The continued deterioration of the small business sentiment index is actually really important," Green added. "It's the same thing that we've seen in the past couple of cycles where the larger companies are well protected while small businesses are under extraordinary pressure."

According to preliminary data, the S&P 500 gained 7.67 points, or 0.15%, to end at 5,210.06 points, while the Nasdaq Composite gained 52.68 points, or 0.32%, to 16,306.64. The Dow Jones Industrial Average fell 9.70 points, or 0.02%, to 38,885.10.

Analysts are expecting aggregate S&P 500 first-quarter earnings growth of 5.0% year-on-year, down from 7.2% at the start of the quarter, according to LSEG.

Cryptocurrency and blockchain-related stocks declined, tracking falling bitcoin prices. Exchange operator Coinbase Global and software company MicroStrategy underperformed on the day.

Moderna was a bright spot, jumping after the drugmaker's individualized cancer vaccine developed with Merck showed promise in an early-stage trial.

Alphabet Inc's shares edged higher, pushing the company closer to the $2 trillion market cap threshold.