Falling oil and materials prices dragged the benchmark S&P 500 index lower for the year on Wednesday, while investors remained cautious a day after deadly bombing attacks in Belgium.
Wall Street's fading five-week rally was further diminished by comments over the past two days by U.S. Federal reserve officials, who indicated the possibility of more interest rate hikes than investors had anticipated.
The possibility of more than the expected two rate hikes for 2016 has sent the dollar higher, pushing down commodity prices.
"That has caused somewhat of a headwind for stocks," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
Gold and metals prices also fell as the dollar strengthened.
U.S. Oil prices also fell more than 3 percent after data showing a rise in U.S. stockpiles last week rekindled worries about a global glut.
Adding to the downturn, investors were deterred by the shortened trading week and uncertainty tied to Tuesday's bombings in Brussels, said Brad McMillan, chief investment officer at Commonwealth Financial in Waltham, Massachusetts.
The Dow Jones industrial average .DJI fell 89.5 points, or 0.51 percent, to 17,493.07, the S&P 500 .SPX lost 12.84 points, or 0.63 percent, to 2,036.96 and the Nasdaq Composite .IXIC dropped 49.13 points, or 1.02 percent, to 4,772.53.
Eight of the 10 major S&P sectors were lower, led by the 1.8-percent fall in the energy sector .SPNY. Chevron (CVX.N) and ConocoPhillips (COP.N) were among the biggest decliners.
Nike (NKE.N) shares were down 3.5 percent at $62.71 after the world's largest footwear maker reported quarterly revenue below estimates.
Gilead Sciences (GILD.O) was down 3.5 percent at $90.43 and Merck was up 0.4 percent. A federal jury upheld the validity of two Merck (MRK.N) patents in a high-profile dispute over Gilead's blockbuster cure for hepatitis C.
Gilead was the biggest drag on the S&P 500 and the Nasdaq.
Vertex Pharmaceuticals (VRTX.O) fell 6.1 percent to $81.45 after Goldman Sachs cuts its price target on the stock.
Yum Brands (YUM.N) was up 2 percent at $80.49 after the Wall Street Journal reported that the fast-food chain's owner was in talks with KKR (KKR.N) about a possible sale of a 19.9-percent stake in its China business.
Declining issues outnumbered advancing ones on the NYSE by 2,137 to 818, for a 2.61-to-1 ratio on the downside; on the Nasdaq, 2,086 issues fell and 662 advanced for a 3.15-to-1 ratio favouring decliners.
The S&P 500 posted 17 new 52-week highs and no new lows; the Nasdaq recorded 19 new highs and 34 new lows.
(Reporting by Abhiram Nandakumar in Bengaluru; Editing by Nick Zieminski)
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