The Dow Jones Industrial Average dipped 326.63 points, or 1.02 percent, to 31,834.11. The S&P 500 decreased 65.87 points, or 1.65 percent, to 3,935.18. The Nasdaq Composite Index fell 373.43 points, or 3.18 percent, to 11,364.24.
Eight of the 11 primary S&P 500 sectors ended in red, with consumer discretionary and technology down 3.57 percent and 3.3 percent, respectively, leading the laggards. Energy rose 1.37 percent, the best-performing group.
The U.S. Labor Department reported on Wednesday that the U.S. consumer price index (CPI) rose 0.3 percent in April, above the 0.2 percent consensus, for an 8.3 percent year-on-year gain. The core CPI, which excludes food and energy, rose 0.6 percent, above the 0.4 percent consensus, for a 6.2 percent year-on-year increase.
The hotter-than-expected report came at a time when investors grew concerned over how much the Federal Reserve will have to boost rates to tame inflation.
"Inflation rose quicker than expected in April," Will Compernolle, senior economist at FHN Financial, said in a note on Wednesday.
"The current Fed tightening path assumes some inflation moderation through this year, so additional upside inflation surprises in the coming months could open the possibility for even more aggressive rate hikes than currently expected in order to restore price stability," said Compernolle.
Last week, the Fed hiked U.S. interest rates by 50 basis points, the largest move in over 20 years, and signaled that half-point rises remain on the table for the next couple of meetings.