Crashing oil prices and weaker-than-expected economic data were pressuring stocks on Friday, with the biggest concern being whether the Federal Reserve would signal a midsummer rate hike in its meeting next week.
The S&P 500 was down 1%, the Dow Jones Industrial Average slid 1.3%, and the Nasdaq fell 0.8%.
Stocks have seen high volatility this week as investors process the likelihood the Fed will remove its "patient" language, which could signal a June or September rate hike.
"The Fed is expected to alter its forward guidance language so as to allow the committee the flexibility to raise interest rates sometime around the middle of this year, possibly as early as June," said Deutsche Bank chief U.S. strategist, Joseph LaVorgna.
Oil prices declined Friday after the International Energy Agency warned that a recovery remained fragile as production in the U.S. shows little signs of meaningfully slowing down. West Texas Intermediate crude plummeted 4.2% to $45.06 a barrel.
"Behind the facade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly," the energy watchdog said in its monthly oil report.
Large-cap oilers Exxon Mobil (XOM), Chevron (CVX), Royal Dutch Shell (RDS.A) and BP (BP) declined, while Energy Select Sector SPDR ETF (XLE) tumbled 1%.
Consumer sentiment in March fell to its worst level since November, down to 91.2 from 95.4 in February, according to the University of Michigan's monthly index. Economists had expected a reading of 94.8.
Producer prices remained weak in February with prices down 0.5% on top of a 0.8% decline in January. Economists had expected an increase of 0.3%. Excluding volatile items such as food and energy, the index remained down 0.5%, compared to estimates of a 0.1% gain.
"The last time inflation pressures were this weak was more than five years ago," said Sterne Agee chief economist Lindsey Piegza. "The exuberance from February's employment report has certainly been undermined with a bout of deflation now at the forefront of monetary policy makers' concerns."
Herbalife (HLF - Get Report) was up 8.7% on reports the FBI and Manhattan prosecutors will investigate potential stock manipulation, accord to The Wall Street Journal. The investigation will cover whether hedge fund investor Bill Ackman deliberately made false statements to lower the stock price.
Ulta Salon (ULTA - Get Report) jumped more than 3%. The beauty supplies chain reported quarterly comparable-store sales up 11% with a 55% jump in e-commerce sales.
Harley-Davidson (HOG) slid 3.5% after Deutsche Bank slashed price targets to $58 from $60, though it maintained a "hold" rating on the stock. Analysts said exposure to foreign exchange could reduce international revenue by $300 million.
NXP Semiconductors (NXPI) added 5.4% after Needham analysts initiated coverage with a "strong buy" rating based on its recent merger announcement with Freescale Semiconductors (FSL). The firm set a $140 price target.
Capping off a volatile week, Lumber Liquidators (LL) slumped nearly 15% after Jefferies cut its price target to $33 from $52. Despite positive market reaction after the company assured investors of product safety on Thursday, Jefferies analysts argued the "damage is done" to the brand and that "guidance shows customer confidence is shaken."
