Stocks finished sharply in the red Thursday, with the Dow down triple digits, weighed down by disappointing earnings from a handful of retailers and weak economic reports.
Meanwhile, the 10-year yield broke below the psychologically important 2.50 percent mark for the first time since last October.
"Volume is at its lightest of the year," noted Art Cashin, director of floor operations at UBS Financial Services. "We like to say 'volume is validity,' but that's not always true. A ship can sink in a quiet sea. That probably is a bit more ominous if we continue to go down as we have in light volume because it becomes evident that it's not heavy selling."
The Dow Jones Industrial Average dropped 167.16 points, or 1.01 percent, to close at 16,446.81. The blue-chip index was down more than 200 points at its session low.
The slumped 17.68 points, or 0.94 percent, to finish at 1,870.85. The S&P 500 earlier broke a key technical level, slipping below its 50-day moving average. And the Nasdaq declined 31.33 points, or 0.76 percent, to end at 4,069.29.
The Russell 2000 index entered correction territory, falling more than 10 percent from its all-time high of 1,212 reached in March.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, shot up more than 10 percent to trade near 14.
Most key S&P sectors were in the red, led by consumer discretionary and energy.
"Two things stand out: Wal-Mart disappointed, which is not a great read on the consumer," said Art Hogan, chief market strategist at Wunderlich Securities. "The other disappointing news was that while we had a relatively good reading on PPI Wednesday, that didn't translate to a higher-than-expected CPI reading."
On the economic front, consumer prices ticked up 0.3 percent in April, as expected, signaling some inflation in the economy. Industrial production slid 0.6 percent, disappointing estimates for a gain of 0.2 percent. Adding to negative news, home builder sentiment weakened slightly in May.
The bad news seemed to outweigh the positives: Jobless claims declined 24,000 to a seasonally adjusted 297,000, according to the Labor Department. That was the lowest reading since May 2007 and brought claims back to their pre-recession level. And New York manufacturers posted a strong growth in activity in May, according to the Federal Reserve Bank of New York's monthly Empire State Manufacturing Survey.
Cisco Systems rallied after the network equipment maker handed in fourth-quarter revenue guidance that topped Wall Street estimates. At least 18 analysts boosted their price target on the company. (Click here for CNBC's full earnings coverage)
So far, 92 percent of S&P 500 companies have reported results this quarter, with 69 percent of firms topping earnings estimates and 22 percent missing.
Adding to woes, negative sentiment was highlighted by comments on Wednesday evening by David Tepper, a closely-watched hedge fund manager at Appaloosa Management.
"I'm not saying go short, I'm just saying don't be too fricking long right now," he told an audience at SkyBridge Capital's conference in Las Vegas. "I think it's nervous time."
Among his concerns were weaker-than-expected U.S. growth and a European Central Bank that badly needs to ease monetary policy.
Fed Chair Janet Yellen is scheduled to address the U.S. Chamber of Commerce after the market closes. Last week, Yellen said the economy is "on track for solid growth" this quarter, but warned that a deterioration in housing or financial markets could alter that scenario.