All three major U.S. stock indexes began to veer lower around 2:30 p.m. EST, having showing little conviction in either direction for much of the session.

Stocks were "near all time highs, they hit resistance," Jay Hatfield, portfolio manager at InfraCap in New York, noting the downturn was "surprisingly vociferous, things went from hot to cold real fast."

"It’s surprising how aggressive the sell-off is, but it makes sense considering how far we’ve come," Hatfield added.

During the session, the S&P 500 got within 0.5% of its all-time closing high. Reaching a new closing high would have confirmed the benchmark index had been in a bull market since closing at the bear market floor in October 2022.

The index is now more than 1.5% below its record closing high.

"We've had this aggressive rally in December and investor sentiment is high, it went from bearish to bullish in almost record time," said Thomas Martin, Senior Portfolio Manager at GLOBALT in Atlanta. "So the markets are asking 'now what?'"

At the conclusion of its policy meeting last Wednesday, the Federal Open Market Committee signaled that it had reached the end of its tightening cycle and opened the door to rate cuts in the coming year.

Chicago Fed President Austan Goolsbee late Tuesday reiterated that the rate at which inflation cools to the Fed's annual 2% target will drive policy on rate reduction.

At last glance, financial markets were pricing in a 71.1% likelihood of that first cut arriving as soon as March, according to CME's FedWatch tool.

On the economic front, bigger than expected jump in U.S. consumer confidence and a surprise increase in existing home sales helped turn the major indexes green.

The Commerce Department is expected to wrap up the week with its third and final take on third-quarter GDP on Thursday, to be followed on Friday by its wide-ranging Personal Consumption Expenditures (PCE) report, which will cover income growth, consumer spending and, crucially, inflation.

Unofficially, the Dow Jones Industrial Average fell 475.03 points, or 1.26%, to 37,082.89, the S&P 500 lost 69.99 points, or 1.47%, to 4,698.38 and the Nasdaq Composite dropped 225.28 points, or 1.5%, to 14,777.94.

Among the 11 major sectors in the S&P 500 communication services was the lone gainer, while consumer staples suffered the steepest percentage decline after packaged food company General Mills cut its sales forecast.

FedEx slid after the package deliver missed quarterly profit estimates and cut its full-year revenue forecast.

FedEx rival United Parcel Service lost ground as well.

Alphabet gained ground after the company announced it was restructuring Google's ad sales unit.

Management consulting firm Aon tumbled following its announcement that it would buy privately held insurance broker NFP in a $13.4 billion deal.