The Dow and S&P 500 both fell about three quarters of a percent, while the Nasdaq dropped nearly a full percent.
A report from the Labor Department showed a surprise fall in U.S. weekly jobless claims, highlighting a resilient labor market despite the Fed's efforts to stifle demand that some worry could lead the economy into a recession.
Kevin Mahn is president and chief investment officer at Hennion & Walsh Asset Management.
"Primarily what I believe is driving stocks lower today is the concern that the Fed is going to go too far and be too aggressive in light of an economy that in all likelihood will fall into a recession during the first half of 2023. We learned from their last FOMC meeting in December that their target rate or their terminal rate for the Fed funds target rate is around 5%. Given that it currently stands at 4.25%, that would suggest a total of 75 basis points of additional hikes in 2023, which could involve three consecutive 25 basis point hikes through the first half of 2023. Obviously, the concern becomes, 'do they go too far and do too much and ignore clear signs that the economy is falling into a slow down period.'"
Meanwhile, the debt ceiling debate intensified Thursday after the U.S. touched its borrowing limit, prompting the Treasury to start 'extraordinary measures' to keep the government paying its bills.
Shares of Procter & Gamble fell more than two percent after the consumer products giant warned that high commodity costs were pressuring profits.
Shares of the megacap growth stocks ended mixed with Microsoft and Tesla closing down more than a percent, while Google-parent Alphabet and Facebook-owner Meta Platforms both rose more than two percent.
Shares of Netflix ended more than three percent lower, but the stock rebounded in extended trading after the company posted subscriber gains for the quarter and announced that co-founder Reed Hastings would shift roles from chief executive to executive chairman.
