The S&P 500 had risen as much as 0.45 percent on the back of some strong earnings and a surprise tick lower in applications for unemployment insurance, before selling off to trade below its 100-day moving average for a second consecutive session. It has closed below that level just four times this year, the last one in mid April.
Markets kept an eye on eastern Europe as Moscow imposed a ban on imports of many Western foods, retaliating against sanctions imposed for its support of rebels in eastern Ukraine and the annexation of Crimea. Russia will ban various imports from the United States, the European Union, Australia, Canada and Norway in a measure that isolates its consumers from world trade to a degree unseen since Soviet days.
"The Russian situation has gone from bad to worse," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin, adding that "imposing an import restriction on agricultural products will likely lead to rapid inflation."
However, he said the recent volatility and pullback are not foreshadowing a market correction.
"Earnings are robust, revenues are rising, and interest rates are likely to go up gradually," Jacobsen said. "These are not the conditions that create market corrections."
The sanctions by Moscow are seen as possibly hurting European economies more than the United States due to closer ties between Russia and Europe. Such a scenario could favor U.S. equities and other assets as foreign cash looking for yield may head towards the world's largest economy. The full extent of the impact, however, is yet to be known.
"Geopolitical risks are heightened, are higher than they were a few months ago. And some of them, like the situation in Ukraine and Russia, will have a greater impact on the euro area than they ... have on other parts of the world," European Central Bank President Mario Draghi said after the ECB left interest rates unchanged at record lows.
The Dow Jones industrial average fell 68.62 points or 0.42 percent, to 16,374.72, the S&P 500 lost 8.33 points or 0.43 percent, to 1,911.91 and the Nasdaq Composite dropped 11.15 points or 0.26 percent, to 4,343.90.
Health insurer stocks fell after Goldman Sachs downgraded Aetna to neutral and cut earnings estimates on a number of its larger peers. Aetna shares fell 3 percent to $75.97. The S&P managed healthcare index fell 2.7 percent.
Shares of Harman International Industries fell 4.1 percent to $106.71 after the maker of JBL and Harman Kardon audio systems forecast full-year profit below market estimates as it spends more to boost production in lower-cost countries.
On the flip side, Twenty-First Century Fox was the largest gainer on the S&P 500 after quarterly profit beat Wall Street's expectations. Executives stressed they would not make a new approach for Time Warner Inc after withdrawing an $80-billion bid. Fox shares rose 5.5 percent to $34.09.
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week and the four-week claims average, considered a better measure of labor market trends, fell to its lowest since February 2006.