about 6 percent so far this year. Many analysts have been expecting the market to ease after the Dow and the S&P 500 came close to all-time highs.
Energy companies' shares were among the weakest, hurt by disappointing results in the sector and a 2 percent drop in crude oil prices. The Energy Select Sector SPDR exchange-traded fund fell 2.1 percent.
Newfield Exploration tumbled 9.3 percent to $24.75 while Devon Energy Corp dropped 6.6 percent to $56.57. Both companies posted fourth-quarter losses, with Devon hurt as it wrote down the value of its assets by $896 million because of weak natural gas prices.
Earlier in the day, unconfirmed rumors that a troubled hedge fund was selling assets added some downward pressure to the market. The rumors appeared to be unfounded.
"I heard the chatter about a hedge fund liquidating things today but how big, I don't know. Certainly, it sparks concern," said Michael James, senior trader at Wedbush Morgan in Los Angeles.
Housing shares also declined, pressured by weaker-than-expected results at Toll Brothers Inc and a drop in groundbreaking to build new U.S. homes, also known as housing starts, in January.
Toll Brothers' stock fell 9.1 percent to $33.56, but is up about 4 percent so far this year, building on a jump of nearly 60 percent in 2012. The Dow Jones U.S. Home Construction index lost 6.7 percent.
"Valuations appear a bit high at these levels, and if I was in a name that had seen a huge run, I'd want to take some chips off the table," said Matt McCormick, money manager at Bahl & Gaynor in Cincinnati.
The Dow's losses were limited by Boeing Co, up 0.2 percent at $74.78 after a source told Reuters that the company had found a way to fix battery problems on its grounded 787 Dreamliner jets. Concerns over that line have weighed on Boeing recently, contributing to a 2 percent drop in the stock's price in January.
Shares of OfficeMax Inc fell 7 percent to $12.09 while Office Depot slid 16.7 percent to $4.18 as the companies announced a $1.2 billion merger agreement. The shares had surged in Tuesday's session after a source said a deal would be announced.
Rival Staples Inc fell 7.2 percent to $13.60 and ranked as one of the S&P 500's biggest decliners.
About 7.49 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, above the 6.48 billion daily average so