The Conference Board in New York said the monthly index that measures consumer sentiment on the overall economy and the relative difficulty of finding work, added nine points in the month to 70.3, well ahead of the consensus forecast, which predicted a reading of 63 compared with the 61.3 level in August.
The closely watched Standard & Poor's/Case-Shiller home price index released Tuesday indicated home prices in a 20-city grouping rose 1.2 percent on an annual basis in July, also beat expectations.
By close of trading, the Dow Jones industrial average shed 101.37 points, or 0.75 percent, to 13,457.55. The tech-dominated Nasdaq Composite index gave up 43.06 points, or 1.36 percent, to 3,117.73. The S&P 500 lost 15.30 points, 1.05 percent, to 1,441.59.
On the New York Stock Exchange, 832 stocks advanced and 2,228 declined on a volume of 3.6 billion shares traded.
The benchmark 10-year treasury rose 12/32 to yield 1.673 percent.
The euro fell to $1.2902 from Monday's $1.2931. The U.S. dollar fell to 77.80 yen from 78.85 yen.
In Tokyo, the Nikkei 225 index gained 0.25 percent, 22.25 points, to 9,091.54.
In London, the FTSE 100 index gained 0.36 percent, 20.87 points, to 5,859.
Celebrity Families of 2014 [PHOTOS]