U.S. crude oil futures settled at $39.79, down $1.66, or 4 percent in their worst daily decline since Feb. 11. Weekly crude oil inventories showed a build of 9.4 million barrels. Crude stocks at Cushing and gasoline stocks declined.
The Nasdaq composite ended 1.1 percent lower as Gilead Sciences lost nearly 3.9 percent and Apple turned lower to close half a percent lower. The iShares Nasdaq Biotechnology ETF (IBB) closed down 3.36 percent for its worst day in more than a week.
Gilead Sciences lost a patent battle with Merck on Tuesday, with the jury upholding the validity of two Merck patents in a high-profile dispute over Gilead's hepatitis C drugs. Damages are still to be determined. Shares of Merck closed up 0.09 percent.
The Russell 2000 closed nearly 2 percent lower for its first three-day losing streak since the 5-straight days of losses ended Feb. 11, when stocks hit lows in the so-called Dimon bottom.
"All that's happened since the year low is the market has reset to year-end expectations," said David Lafferty, chief market strategist at Natixis Global Asset Management.
"We didn't read too much into the 11-12 percent sell-off and we're not reading too much into the 11-12 percent rally. We think it just gets us back to the starting point of this year," he said.
After falling into correction territory earlier this year, the Dow Jones industrial average and the S&P 500 held in positive territory year-to-date on Tuesday. Stocks closed mixed Tuesday after opening lower amid news of explosions in Belgium's capital that killed more than two dozen people at the airport and metro system.
With Wednesday's declines, the S&P 500 erased its gains for the year so far, while the Dow held about half a percent higher for the year so far. Both indexes are within 5 percent of their 52-week intraday highs.
The S&P 500 also posted its eighth-straight day of sub-1 percent moves, the longest streak since the one ended in early August.
"We believe that we're going to be largely in a trading range," said Bill Northey, chief investment officer at U.S. Bank Private Client Group. "To move materially higher from this point it's going to need evidence of earnings growth. It's not an environment where you're going to get to see multiples expand."
IBM and Nike were the greatest contributors to declines in the Dow Jones industrial average, which ended near session lows, off about 80 points. Nike closed almost 3.8 percent lower after briefly falling more than 5 percent in morning trade following earnings late Tuesday that beat, but revenue that missed.
UnitedHealth was the top contributor to gains in the Dow.
In other corporate news, the California Department of Insurance approved health insurer Centene's planned merger with Health Net.
General Mills reported ex-items earnings of 65 cents per share, three cents above estimates, while net sales fell 8 percent to $4 billion for a third-straight quarterly decline as the strong dollar and weak U.S. demand weighed. The stock closed up nearly 0.4 percent.
The U.S. dollar index continued a recent reversal from lows touched after the Fed meeting last week with its largest daily gain since Feb. 26, up nearly half a percent on the day. Earlier, the index hit a high of 96.230, its highest since March 16
Read MoreFed rate hike expectations jolting currencies
"The Fed is heavily influenced by the dollar and putting off the rate increases is evidence that that is what they are focused on," said Dan Veru, chief investment officer at Palisade Capital Management.
"I think the market is in reasonable shape. It's come a long way in a short time," he said.
Gold futures for April delivery settled $1,224.00 an ounce, down $24.60 or about 2 percent for their worst daily loss since Feb. 16.
In economic news, new home sales rose 2.0 percent in February to a seasonally adjusted annual rate of 512,000 units, Reuters said. New single-family home sales surged in the West, but fell sharply in the Northeast, Midwest and South.
Weekly mortgage application volume decreased 3.3 percent on a seasonally adjusted basis, according to the Mortgage Bankers Association.
Treasury yields edged lower, with the 2-year yield near 0.85 percent and the 10-year around 1.88 percent.
The euro was at $1.1177 and the yen near 112.44 yen against the greenback.
Read More Fed Chair Yellen has a mini revolt on her hands
Overnight, Philadelphia Fed President Patrick Harker said in a Reuters report the central bank should consider another interest rate hike as early as next month if the U.S. economy continues to improve as it has of late. While he supported last week's decision by his colleagues to leave policy unchanged, "there is a strong case that we need to continue to raise rates," he said in the article.
European stocks closed mixed as commodity-related stocks declined while travel-related names recovered.
Asian stocks ended mostly lower, although the Shanghai composite closed slightly higher.
Read MoreEarly movers: GIS, NKE, KKD, RHT, AZO, MRK, AZN, CS, NLSN & more
The Dow Jones industrial average closed down 79.98 points, or 0.45 percent, to 17,502.59, with Nike the greatest decliner and Visa and UnitedHealth leading advancers.
The S&P 500 closed down 13.09 points, or 0.64 percent, at 2,036.71, with energy leading eight sectors lower and utilities and consumer staples the only advancers.
The Nasdaq composite closed down 52.8 points, or 1.1 percent, at 4,768.86.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, held just below 15.
About three stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 862 million and a composite volume of 3.6 billion.
—Reuters contributed to this report.
On tap this week:
5:30 p.m.: Philadelphia Fed President Patrick Harker gives welcoming remarks at a book launch
Earnings: Accenture, Winnebago, GameStop
8:15 a.m.: St. Louis Fed President James Bullard speaks on the U.S. economy and monetary policy
8:30 a.m.: Durable goods
8:30 a.m.: Jobless claims
9:45 a.m.: Markit flash US services PMI
10:30 a.m.: Natural gas inventories
11 a.m.: Kansas City Fed survey
1 p.m.: Oil rig count
Markets closed for Good Friday
8:30 a.m.: 4th quarter GDP (third estimate)
8:30 a.m.: Corporate profits
*Planner subject to change.
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