On the Dow, Alcoa and Hewlett-Packard got slammed and 17 of the 30 bluechip stocks lost at least 2 percent.
All seven of the major indexes in the Dow, S&P, Nasdaq and Russell closed below their 50-day moving averages.
The economy was the prevailing story of the session.
The Philadelphia Fed index, considered a strong barometer of demand, posted a weak reading of -16.6, indicating contraction.
Other measures were no better: Weekly jobless claims fell slightly but the four-week moving average rose to a 2012 high, while the Purchase Managers Index report from Markit said manufacturing grew at its slowest pace in 11 months as hiring slumped and demand waned. Finally, home sales fell in May though prices rose, casting doubts on a real estate rebound.
"The weak (Philadelphia Fed) reading is coincident with our belief that the economy has slowed in the spring and summer and we feel increasingly comfortable with our current outlook that suggests growth shouldn’t be all that much better as the year progresses," BTIG said in a note to clients.
Likewise, Goldman Sachs said the indicator bolstered the case that "the market will need to confront a deteriorating growth picture near term."
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