The broad sell-off followed a slide in bond prices, which sent the 10-year Treasury yield to its highest level in nearly seven years. The Dow Jones Small-Cap Growth TSM Index closed at 9,941.29 for a loss of -8.02 points or -0.08%.
The S&P 500 fell 0.7 percent, to 2,711.45.
Core April retail sales - which excludes gasoline, automobiles, building materials and food services - rose at a brisker 0.4 percent monthly pace over March, as consumer spending is quickening its pace after a first-quarter slowdown.
UNHEALTHY TURN: Health care sector companies took some of the worst losses.
The proximate trigger for the rise in yields was the release of U.S. retail sales data, which contained some upward revisions to prior months, and an Empire manufacturing survey that showed the highest prices paid component since 2011.
The Nasdaq is down 51.26 points, or 0.7 percent. Mortgage rates, which have been rising this year, tend to track the movement in the 10-year Treasury yield.
The S&P 500 rose 9 points, or 0.3 percent, to 2,736.
USA stocks dropped sharply on Tuesday after Home Depot reported quarterly sales that fell short of Wall Street's expectations and interest rates breached new highs.
Among the S&P industry groups, the rate-sensitive real estate space ended at the bottom of the standings with a 1.7% loss, including a 3.8% rout in the iShares U.S. Home Construction ETF. The Nasdaq composite fell 75 points, or 1 percent, to 7,335.
ENERGY: Benchmark U.S. crude oil gained 59 cents to $71.55 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price global oil, added 20 cents to close at $78.43 a barrel in London. Soon-to-be NY Fed President Williams noted that "inflation has just barely reached our 2 percent goal" and said that he thought the chances of two or three additional hikes this year were reasonably balanced.
The Russell 2000 is up 64.83 points, or 4.2 percent.
CURRENCIES: The dollar rose to 109.97 yen from 109.53 yen late Monday.
The greenback's gains weighed on precious metals prices.
In Asia, Japan's benchmark Nikkei 225 edged down 0.2 percent.