Strong retail sales data and comments from at least two Federal Reserve speakers recast bets that the central bank's policy tightening regime is coming to an end.
Approximately 68% of the S&P 500 companies ended Wednesday's session lower. The index fell after a report showed that retail sales increased by the most in eight months in October, exceeding expectations and indicating that the economy can withstand further Fed hikes. The target corporation's disappointing earnings also dampened spirits.
The tech-heavy Nasdaq 100, which is more sensitive to interest rates, fell as much as 1.7%. A closely watched part of the US yield curve is now the most inverted it has been since the early 1980s, signaling fears that the Fed's restrictive policy will suffocate the economy.
The market retreated after a strong rally fueled by weaker-than-expected US inflation data, which fueled speculation that the Fed might be able to slow the pace of interest-rate hikes. While a slew of federal officials have recently backed these expectations, they have also emphasized the importance of continuing to hike into next year.
On Wednesday, New York Fed President John Williams ruffled feathers by saying the central bank should avoid factoring financial stability risks into its calculations. Meanwhile, San Francisco Fed President Mary Daly has stated that a pause is "off the table."
