Stocks fell Wednesday after fresh data showed that inflation--though easing--remained higher than expected last month, feeding renewed apprehension about the Federal Reserve's likely response and extending a punishing stretch for equities.

The $S&P 500 index(.SPX.US)$ declined 65.87, or 1.6%, to close at 3935.18. The $Dow Jones Industrial Average(.DJI.US)$ fell 326.63, or 1%, to 31834.11, while the technology-focused $Nasdaq Composite Index(.IXIC.US)$ was down 373.44, or 3.2%, to 11364.24, its lowest close since November 2020. The day offered no relief for anxious stock investors, who have been bracing for the Fed to remove more of its economic support.

Trading was bumpy. The S&P 500 turned lower in the afternoon after spending much of the morning in the green, and its losses deepened as the closing bell neared. There is a long way to go before rising prices come back under control, investors and analysts warned, giving rise to volatility as financial conditions continue to tighten.

The Band-Aid is still coming off slowly. According to the Fed, we're not near the end of this process that everyone wants over.

- said Michael Farr, the chief executive of investment advisory Farr, Miller & Washington.

The consumer-price index increased 8.3% in April from the same month a year ago, data released Wednesday morning showed, decelerating from an 8.5% annual rate in March but above the 8.1% expected by economists. Lower annual inflation last month marks the first monthly easing of price increases since August 2021.

Volatile markets have been primed to react strongly to any headline hinting at persistent price pressures, said David Kotok, chief investment officer at Cumberland Advisors. "We're in those kinds of crazy times," he said.

The inflation data sent short- and long-term government-bond yields converging, which investors said signaled concerns about tighter monetary policy and growth. The yield on the two-year Treasury note--highly responsive to expected Fed tightening--rose to 2.629%, from 2.623% at Tuesday's settlement. The yield on the 10-year Treasury, meanwhile, declined to 2.918%, from 2.990% a day earlier. Bond yields fall as prices rise.

Riskier assets continued to suffer. Niche pharmaceutical companies were among the Nasdaq's biggest losers on the day, with larger tech firms such as $Netflix(NFLX.US)$ and Facebook parent $Meta Platforms(FB.US)$ both declining more than 4%. In the unpredictable world of cryptocurrency, bitcoin lost more ground and continued to trade more than 50% off of its all-time highs from last year.

More speculative bets like investments in growth-oriented stocks and crypto have been slammed this year. Higher interest rates set by the Fed translate into greater returns on safe assets, dimming the appeal of far-off profits. The central bank last week lifted rates by half a percentage point, the biggest rise since 2000, and approved a plan to shrink its $9 trillion asset portfolio, kicking into a higher gear its campaign to rein in 40-year-high inflation.

Aoifinn Devitt, chief investment officer at investment advisory Moneta, said she has been guiding clients toward investments grounded in the real economy, such as in the energy and infrastructure sectors, because of those sectors' relative strength amid inflation. The selloff among tech stocks, she noted, has been "indiscriminate."

It's probably a sign of fear that has entered the retail investor complex.

- Ms. Devitt said.

Riskier corners of the market got little comfort on Wednesday. Bitcoin's recent selloff, and a downbeat quarterly report Tuesday, contributed to declines for $Coinbase(COIN.US)$. Its shares slid $19.27, or 26%, to $53.72 after the cryptocurrency exchange said its users declined from the previous quarter. Shares of $Unity Software(U.US)$ plunged $17.83, or 37%, to $30.30 after the videogaming software developer widened its loss and gave second-quarter revenue guidance below analysts' expectations.

$Kohl's Corp(KSS.US)$'s stock fell $2.74, or 5.6% to $46.65 as shareholders rejected an activist investor's push to replace up to 10 directors as the retailer is exploring a potential sale. $Switch(SWCH.US)$ rose $2.79, or 9.1%, to $33.54 after the computer-services company said it was being taken private by a consortium of investors.

On the other hand, strong earnings reports from some companies drove gains. Shares of $Electronic Arts Inc(EA.US)$ rose $8.89, or 8%, to $120.49 after the videogame company said revenue in the latest fiscal year rose 24% to $6.99 billion. Doughnut chain $Krispy Kreme(DNUT.US)$ logged a rise of 46 cents, or 3.8%, to $12.67 after reporting earlier Wednesday that net revenue jumped 16% year over year in the three months through March.

Oil prices climbed. Brent crude, the global benchmark, rose $5.05 a barrel, or 4.9%, to settle at $107.51 a barrel.

Overseas markets were broadly higher. The Stoxx Europe 600 gained 1.7%, led by shares of auto and real-estate companies. In Asia, Hong Kong's $Hang Seng Index(800000.HK)$ gained 1% and the $SSE Composite Index(000001.SH)$ added 0.8%.