U.S. stocks retreated slightly on Wednesday after Tuesday's a little bit surprising rally, shrugging off the country's first partial government shutdown in 17 years.

Most traders attributed Tuesday's market rally to increasing expectations that the U.S. Federal Reserve could delay tapering of its bond buying programs due to the government shutdown, as well as capital inflows at the beginning of a new month and quarter.

However, investors are reluctant to take fresh positions ahead of a speech Wednesday afternoon from Fed Chairman Ben Bernanke, amid the continuing government shutdown with little progress in view.

In Washington, U.S. House and Senate lawmakers still remained at an impasse over the funding bill, as the government shutdown was felt throughout the country and the looming debt ceiling deadline added to the woes.

On the economic front, U.S. private sector employment increased by 166,000 jobs in September, according to the ADP, a private payrolls processor, missing market consensus of 180,000.

With a string of government economic data likely to be delayed due to the shutdown, including the most closely-watched non-farm payrolls report for September originally scheduled for Friday, the ADP report becomes the biggest focus of the week.

Moreover, U.S. mortgage applications fell 0.4 percent for the week ending Sept. 27 from the prior week, according to the Mortgage Bankers Association.

On corporate side, Microsoft shares recouped earlier losses on a report that three of its top 20 shareholders want Bill Gates to step down as chairman of the giant tech.

In midday trading, the Dow Jones Industrial Average lost 81.12 points, or 0.53 percent, to 15,110.58 points. The S&P 500 dipped 6. 29 points, or 0.37 percent, to 1,688.71 points. The Nasdaq Composite Index sank 9.19 points, or 0.24 percent, to 3,808.79 points.