Stocks tanked in late morning but had been weaker early after a surprising decline in February's durable goods showed soft business spending for a sixth month. That was met by a slashing of growth forecasts for the first quarter. According to the CNBC/Moody's Analytics rapid update, economists now see first-quarter growth at 1.8 percent.
Traders were also watching headlines from Yemen, which sent oil prices higher and unsettled the stock market. Reports that Saudi Arabia moved heavy military equipment near its border with Yemen and that Yemen President Abdu Rabbu Mansour Hadi fled the country fed fears of a broader conflict.
Read MoreOil higher on Yemen conflict
Interestingly, as the stock market sold off, it was met with a selloff in bonds, somewhat odd in that the two markets don't often move in tandem. The dollar also sold off, and that more often than not recently had been considered a positive for stocks.
"I think we were in a trending market. Now we're going to be in a consolidating, sideways market, and that's a prelude to another trend," said Marc Chandler, Brown Brothers Harriman's chief currency strategist. "I think we'll have another move up in the dollar as we get stronger economic data."
Chandler said the markets had been trending together before the Fed meeting last week, but now the markets wait for news on the economy and earnings. "Now we're going back to a market that lacks conviction," he said. The dollar turned sharply and violently lower after the Fed released new forecasts, reducing its outlook for economic growth but also slowing the path of interest rate hikes.
Massocca said he does not expect a major selloff in stocks. "I think we trade back down to where we were before the FOMC meeting, and then it's going to be 'wait and see' on how bad earnings are. I don't think we'll retest the February low, but we may retest the March low," he said, pointing to the 2,040 range on the S&P 500.
Read MoreDollar dings stock market confidence
The iShares Nasdaq Biotechnology ETF IBB fell more than 4.7 percent. The semiconductor sector, vulnerable to a weaker dollar, was also off sharply.
"It's the poster boy for stock market speculation," said Peter Boockvar, chief market analyst at The Lindsey Group. "(Biotech) had the most extraordinary run. It went parabolic last week, and I think that was noteworthy and it should not be ignored. You had poor economic data this morning. You've had five months in a row of poor durable goods numbers."
Traders have been worried about the prospect of a weak first quarter for corporate earnings, and the poor data underlined that concern. According to Thomson Reuters, earnings are expected to be down 3.1 percent for the S&P 500, the first decline since 2009. Earnings are expected to be hit by the stronger dollar's impact on foreign sales. Falling oil prices are also expected to take a bite out of energy company earnings.
"Today and tomorrow are critical to see if there's a short-term floor put in," said Scott Redler, partner at T3Live.com. "Look at the transport group. It went from the highs to the lows of the range without stopping, and if you wanted to buy a dip, you got run over. I think people are being cautious because the market's flat and nobody has to chase right now. The theme of 2015 has been, there's no rush."
Redler said the economic data were also a factor. "I think people are confused. The narrative was bad news was good news. The market has a little bit of an identity crisis, where it doesn't know if good news is good news," he said.
Traders also pointed to the proximity to the end of the quarter, and said some investors may be selling their winners and buying weaker names. For instance, beaten-down energy stocks were the top market performer as oil moved higher Wednesday.