The Dow Jones Industrial Average dropped a hefty 100.17 points (0.79 percent) to finish at 12,595.75.
The broader S&P 500 index slid 10.88 points (0.81 percent) to 1,337.77, while the tech rich Nasdaq Composite tumbled 34.57 points (1.21 percent) to 2,828.47.
"The US equity markets are riding out the week in disappointing fashion, with strength in the dollar fostering a reversal in commodity prices, sending stocks solidly below the flatline," Charles Schwab analysts said in a client note.
Greece's debt crisis weighed on the equities markets amid speculation that Athens will need an additional bailout.
Eurozone and European Union finance ministers are expected to discuss Greece at meetings on Monday and Tuesday.
"The financial markets continue to be volatile reacting to not only US economic updates but also global developments," Frederic Dickson at DA Davidson & Co. said.
The Labor Department reported its consumer price index rose a seasonally adjusted 0.4 percent in April, lifted by surging gasoline prices and matching expectations.
"Today's report provides further evidence of gradually increasing prices across a broad range of goods and services, consistent with our view that the degree of economic slack is not that large," said Peter Newland at Barclays Capital Research.
The market also shrugged off a better-than-expected University of Michigan consumer sentiment report.
"The Conference Board's consumer confidence index does a much better job at taking the temperature of the labor market and we will hold judgment until we have seen that report," said John Ryding at RDQ Economics.
Earnings reports from upscale retailer Nordstrom and graphics chipmaker Nvidia came in below expectations. Nordstrom tumbled 3.13 percent to $47.63 and Nvidia plunged 10.9 percent to $18.26.
Yahoo! shares sank 3.6 percent to $16.55 as investors focused on a dispute with Chinese partner Alibaba over ownership of its online payments business, Alipay.
Financials were on the defensive. Bank of America slid 2.2 percent to $11.93 and JPMorgan Chase dropped 2.1 percent to $43.15, two of the steepest decliners on the Dow.
Bond prices rose. The yield on the 10-year Treasury note fell to 3.19 percent from 3.23 percent late Friday, while that on the 30-year bond dropped to 4.33 percent from 4.35 percent.