The technology sector was the biggest weight on the S&P 500 index with a 1.9-percent drop. But some investors welcomed the dip in the sector, which has been S&P's leading gainer so far this year.
"That's a chance and an opportunity to build your position or to get into it," said Chris Bertelsen, chief investment officer of Aviance Capital Management in Sarasota, Florida.
Shares of Macy's tumbled 10.2 percent and Kohl's was down 6 percent as the companies continued to report a drop in quarterly same-store sales, stoking concerns that their turnaround may still be a long way off.
Data showed U.S. producer prices unexpectedly fell in July, recording their biggest drop in nearly a year, while another set showed the number of Americans filing for unemployment benefits unexpectedly rose last week.
However, Federal Reserve Bank of New York President William Dudley suggested on Thursday that the central bank was on track to raise interest rates once more as he expects sluggish inflation to rise over the next several months.
Selling was broad. Declining issues outnumbered advancing ones on the NYSE 6-to-1; on Nasdaq, a 3.60-to-1 ratio favored decliners.