Wall Street's main indexes were on track to extend losses for a fourth straight session on Thursday as investors worried that the Federal Reserve would keep raising interest rates for longer than previously anticipated.
Market participants were hoping that the Fed, which raised rates by 75 basis points on Wednesday, would ease its hawkish stance in the near future after a string of big rate hikes has fanned fears of a recession.
However, the S&P 500 and the tech-heavy Nasdaq marked their biggest one-day percentage declines in nearly a month after Fed Chair Jerome Powell said it was "very premature" to discuss when the central bank might pause the rate hikes.
While traders are still split between the odds of a 50 bps and 75 bps rate hike in December, the peak Fed funds rate is seen climbing to 5% or higher next year, compared with a prior estimate of 4.50%-4.75% rise.
"The Fed was focused on pivoting the discussion from the speed of the increases to the level and the length of time their policy remains restrictive. It's bringing in a lot more hawkish rhetoric," said Michelle Cluver, portfolio strategist at Global X ETFs.
"It means that your terminal rate is higher and that's why markets are repricing in rates remaining higher for longer."
US stocks dip ahead of Fed announcement
Meanwhile, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, providing further evidence of a strong labor market.
Another set of data on Thursday showed the U.S. services industry grew at its slowest pace in nearly 2-1/2 years in October and businesses continued to face higher input prices, confirming that inflation was shifting to services from goods.
The nonfarm payrolls report due on Friday will be crucial as investors try to gauge whether the Fed's rate hikes have significantly cooled the economy.
At 12:29 a.m. ET, the Dow Jones Industrial Average was down 16.78 points, or 0.05%, at 32,130.98, the S&P 500 was down 20.26 points, or 0.54%, at 3,739.43, and the Nasdaq Composite was down 109.26 points, or 1.04%, at 10,415.53.
Shares of megacap technology companies extended losses, with Apple Inc, Microsoft and Alphabet (GOOGL.O) down between 1% and 4% as the 10-year U.S. Treasury yield hit its highest level since Oct. 25.
Gains in industrials including aircraft firm Boeing and heavy equipment maker Caterpillar limited declines on the Dow Jones.
Among companies reporting their quarterly results, Royal Caribbean Group rose 4.7% after mixed results, while Etsy Inc jumped 13.6% to the top of the S&P 500 after beating quarterly revenue estimates.
Qualcomm Inc and Roku Inc tumbled 7.5% and 4.1% respectively, after their holiday quarter forecasts fell below expectations.
Declining issues outnumbered advancers for a 1.66-to-1 ratio on the NYSE and for a 1.47-to-1 ratio on the Nasdaq.
The S&P index recorded four new 52-week highs and 44 new lows, while the Nasdaq recorded 43 new highs and 241 new lows.