Stocks gave back earlier gains on Wednesday as investors hit the brakes on the New Year's rally, now in its third week.
The Dow Jones Industrials plummeted 378.06 points, or 1.1%, to 33,532,79.
The S&P 500 lost 30.63 points to 3,960.34
The NASDAQ Composite Index subtracted 57.53 points to 11,037.58, and was on pace for its first down day in the last eight.
Microsoft announced plans to lay off about 10,000 employees, which hurt investor sentiment. The stock fell and dragged the Dow lower with it.
Declining prices were also reflected in retail sales, which fell 1.1% in December, slightly more than the 1% forecast.
Southwest shares fell 2% amid news that the company's pilots union is calling a vote to approve a potential strike.
The moves came after the latest reading on the producer price index, which measures input costs from companies and could be a leading indicator of future inflation, showed a 0.5% decline for December. Economists surveyed by Dow Jones expected a 0.1% decline. That gave relief to investors who have hoped for inflation to retreat and for the Federal Reserve to slow or stop its rate hikes.
Prices for the 10-year Treasury were up sharply, lowering yields to 3.43% from Tuesday's 3.55%. Treasury prices and yields move in opposite directions.
Oil prices gained 81 cents to $80.99 U.S. a barrel.
Gold prices faded $1.80 to $1,908.10 U.S. an ounce.