US stocks were sharply lower on Thursday after disappointing labour market data clashed with the possibility of a more hawkish Federal Reserve, while rising tensions in the Korean peninsula providing additional pressure.
Private employers added 158,000 jobs in June, the ADP National Employment Report showed, coming in below the estimated gain of 185,000 and suggesting cooling in the U.S. labour market as it nears full employment.
Another set of data showed weekly jobless claims rose for the third straight week, climbing to 248,000 and topping the 243,000 expected.
While the data still indicates a tight labour market, the reports hint at a soft monthly nonfarm payrolls report on Friday, which includes hiring in both the public and private sectors.
The softer data comes on the heels of Wednesday's release of the minutes from the Federal Reserve's June meeting, which showed policymakers were increasingly split on the inflation outlook and how it might affect the pace of interest rate increases.
Those two factors helped push yields on U.S. Treasuries <US10YT=RR> higher and dampened the attractiveness of equities.
"ADP came in pretty soft, people got a little nervous there," said Anthony Conroy, president of Abel Noser in New York.
"People said the Fed is pretty uneasy over low inflation but they are still going to keep doing what they are doing with rates because they have to do something."
Geopolitical tensions also weighed on sentiment, with U.S. President Donald Trump vowing on Thursday to confront North Korea "very strongly" following its latest missile test and urging nations to show Pyongyang that there would be consequences for its weapons programme.
The Dow Jones Industrial Average fell 158.13 points, or 0.74 percent, to 21,320.04, the S&P 500 lost 22.79 points, or 0.94 percent, to 2,409.75 and the Nasdaq Composite dropped 61.39 points, or 1 percent, to 6,089.46.
The declines marked the biggest percentage drop for the S&P 500 in since May 17.
Shares of Tesla dropped 5.56 percent after the luxury electric carmaker's Model S did not receive the top score in certain tests by the Insurance Institute for Highway Safety.
General Electric lost 3.80 percent as the worst performer on the Dow after the European Commission accused the company of providing misleading information during a merger deal.
L Brands plunged 14.08 percent, the worst performer on the S&P 500, after the Victoria's Secret owner's June sales came in below expectations.
Declining issues outnumbered advancing ones on the NYSE by a 3.12-to-1 ratio; on Nasdaq, a 2.35-to-1 ratio favoured decliners.
About 6.66 billion shares changed hands in U.S. exchanges, compared with the 7.18 billion daily average over the last 20 sessions.