"The currency markets are dominating overall market moves and anytime you see an important move in one currency or another from a currency market it seems to cause nervousness in equity markets," said Quincy Krosby, market strategist at Prudential Financial.
She attributed much of the declines to profit-taking in an overall risk-off environment ahead of earnings season.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, hit a high of 16.77, its highest since March 15.
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Gold futures for June delivery settled up $13.70 at $1,237.50 an ounce. 2-year and 10-year Treasury yields fell to lows not seen since late February.
"Some of the indicators that this might be more than a one-day event are coming into play," said JJ Kinahan, chief strategist at TD Ameritrade.
U.S. crude oil futures settled off session lows, down 49 cents, or 1.30 percent, at $37.26 a barrel. The decline broke a two-day win streak, which saw WTI rising 5.2 percent on Wednesday for its biggest daily gain since March 16.
Financials led S&P 500 declines, falling 1.9 percent with the SPDR Bank ETF (KBE) falling 2.63 percent. Both had their worst day since Feb. 11.
As of the close, the major averages were on pace for a weekly decline of 1.35 percent or more.
The Nasdaq composite underperformed as Apple closed nearly 2.2 percent lower and the iShares Nasdaq Biotechnology ETF (IBB) closed about 1.8 percent lower after jumping nearly 6 percent on Wednesday.
The U.S. dollar index held a touch higher, with the euro near $1.137.
"We definitely had a little breakdown from the stable uptrend we had (in stocks)," said Peter Coleman, head trader at Convergex. He noted that recent volatility in currencies could cause stock market volatility in the near future.
Strength in the yen and the euro despite central bank easing earlier this year has raised concerns about the effectiveness of monetary policy. The European Central Bank and Bank of Japan are both scheduled to meet later this month.
Andrew Lee, deputy head of the ultra high net worth and alternative investment at UBS Wealth Management, said the yen should be weaker over the medium term given further easing by the Bank of Japan and a Fed still on track to raise rates as domestic data improves.
"While there is risk that the yen strengthens further, the probability of this happening should be more limited given current levels, unless a risk-off environment returns," he said.
The Dow transports closed 1.3 percent lower for its first six-day losing streak since the one ended Aug. 25, 2015.
"I think this is a global growth play and global growth scare that continues to show economies in the rest of the world struggling and investors are wondering if central banks are starting to run out of bullets," said Nick Raich, CEO of The Earnings Scout. "That's the trade. We don't think that's the case."
The Fed meeting minutes released Wednesday afternoon highlighted policymakers' concerns about global growth.
"For the market itself that's the bigger issue," Krosby said."Traders tend to take advantage of whatever's out there. … On a day the market is waiting for the next phase, you get the market overthinking."
"This back and forth, risk-on, risk-off has become the norm within this trading range," she said. "We hope the earnings season gives the clarity to get this market moving higher even if it's on a stock-specific basis."
U.S. stocks rallied Wednesday, helped by a surge in oil prices, as health care and energy stocks led gains.
"This schizophrenic whipsaw action in the market is puzzling because the economic data hasn't changed day to day to warrant that kind of volatility," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.