The Dow and S&P 500 each shed roughly one percent, and the Nasdaq lost more than eight-tenths of a percent.

The Labor Department's Consumer Price Index report pegged the annual inflation rate in March at 3.5 percent, a reminder that it's a bumpy road to the Fed's two percent inflation target.

Rob Haworth is senior investment strategist at U.S. Bank Wealth Management.

"Right now, really what we're seeing is still elevated services, inflation and still elevated housing inflation. So those two things, especially where we're seeing short supplies right? We still have short inventories, short housing inventories, and as we heard in the jobs report, we still don't have enough people hired yet. Those are the things really keeping inflation higher."

Prior to the CPI data, markets had priced in a 56% chance of a rate cut in June.

After the report, that likelihood dwindled to just 16.5, according to CME's FedWatch tool.

Minutes from the Fed's March policy meeting out Wednesday reflected concerns that inflation's progress might have stalled and that rates may have to stay higher for longer.

Equity prices were further pressured by benchmark Treasury yields, which breached 4.5% to touch the highest level since November.

Most megacap growth stocks slipped, with the exception of Nvidia, which bucked the trend by rising 2%.

And U.S.-listed shares of Alibaba gained more than 2% after the company's co-founder Jack Ma released a memo to employees expressing support for the internet giant's restructuring efforts - a rare move from the billionaire who has spent the last few years away from the spotlight.