Financial and tech stocks were hit hard by a handful of persistent investor worries on Friday, putting U.S. stocks on track for their largest monthly percentage decline in a year.

All three major indexes ended decisively lower and posted steep weekly declines, with the blue-chip Dow logging its biggest weekly drop since November.

The selloff was driven by uncertainty over costs and disruption related to artificial intelligence, revived tariff uncertainties and simmering geopolitical tensions.

"To wrap up the month of February, we were reminded there are still some cracks out there," said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska. "Adding to the day's weakness was the hotter inflation data, potentially pushing back on the idea of a dovish Fed later this year."

"It's been a rough go in February, but corporate America is looking at over a 14% gain in earnings in the fourth quarter," Detrick added. "The reality is that earnings drive long-term stock gains and this was a very impressive earnings season."

Financial stocks slid after worries of contagion in the sector after reports that Barclays, Jefferies, Wells Fargo and other banks face potential losses related to the collapse of UK mortgage provider Market Financial Solutions Ltd, amid broader concerns about lending standards. Wells Fargo, Jefferies and U.S.-listed shares of Barclays ended sharply lower.

Tech shares also continued to weigh on the indexes as lingering fears related to AI dragged chips and software lower on the day.

Defensive sectors such as consumer staples, healthcare and utilities were the session's clear outperformers.

"This is a classic risk-off environment where the pure defensive areas are finding some strength while the market is turning its head on some of the more cyclical growth areas that are clearly lagging," Detrick said.

On the economics front, a hotter-than-expected Producer Price Index reading fortified expectations that the U.S. Federal Reserve is unlikely to cut its key interest rate in the near term.

According to preliminary data, the S&P 500 lost 30.49 points, or 0.44%, to end at 6,878.91 points, while the Nasdaq Composite lost 204.74 points, or 0.92%, to 22,673.65. The Dow Jones Industrial Average fell 521.69 points, or 1.05%, to 48,977.51.

Nvidia extended the previous session's drop despite solid earnings, a sign of persistent unease over emergent AI technology. Zscaler plunged after the cloud security firm reported a wider net loss in the second quarter. Netflix jumped as investors cheered its decision to exit the fight for Warner Bros Discovery, which dropped on the news.

Paramount Skydance, WBD's likely buyer, closed sharply higher. Block surged after the payments firm said it would axe nearly half its workforce, as part of its effort to embed AI across operations.

Dell shot up after the PC maker said it expects revenue from its key AI-optimized servers business to double in fiscal year 2027 and promised to return more cash to shareholders.