People pass by the Salesforce Tower and offices in New York City, U.S., March 7, 2019.
People pass by the Salesforce Tower and offices in New York City, U.S., March 7, 2019. Reuters / BRENDAN MCDERMID

U.S. stocks fell in volatile trade on Wednesday after strong factory activity and job openings data stoked concerns that the Federal Reserve would keep raising interest rates sharply this year.

Ten of the 11 major S&P sectors declined, with financial and healthcare stocks down 2.1% and 2% respectively. Energy stocks gained 1% as Brent Crude rose to $117 a barrel. [O/R]

U.S. manufacturing activity unexpectedly picked up pace in May as demand for goods remains strong, easing concerns about an imminent recession.

A separate report showed U.S. job openings fell to 11.4 million in April, but still remained at considerably high levels, suggesting that wages would continue to rise as companies try to attract workers, and contribute to inflation staying uncomfortably high for a while.

"Inflation is still front and center for the markets. All of the economic data that you're going to be looking at over the next couple of months is going to be looked through an inflation viewpoint," said Paul Nolte, portfolio manager at Kingsview Investment Management.

So when nonfarm payrolls data is released on Friday, markets will focus on wage growth, Nolte added.

Echoing comments from Fed Governor Christopher Waller, San Francisco Fed President Mary Daly said on Wednesday she sees half-point interest rate hikes in the next couple of meetings as the central bank battles high inflation, lifting rates to 2.5% as quickly as possible.

"Anytime there's a Fed speaker, investors are looking for little clues as to what's going to happen post September," said Paul Kim, chief executive officer, Simplify ETFs in New York.

"Is the Fed going to keep hiking or are they going to hike rate, pause, hike rate, pause? We keep hearing both sides, so you see the markets react one way and then go the other."

Uncertainty about the U.S. central bank's policy move, the war in Ukraine, prolonged supply chain snarls due to COVID lockdowns in China and higher Treasury yields have rocked stock markets, with the benchmark S&P 500 index falling 14.3% year-to-date.

The Fed on Wednesday will also begin trimming its $9 trillion balance sheet, amassed as it sought to support the economy amid the COVID-19 pandemic.

At 12:28 p.m. ET, the Dow Jones Industrial Average was down 328.77 points, or 1.00%, at 32,661.35, the S&P 500 was down 47.24 points, or 1.14%, at 4,084.91, and the Nasdaq Composite was down 137.45 points, or 1.14%, at 11,943.94.

The benchmark U.S. 10-year Treasury yield climbed to 2.92%, its highest in two weeks. [US/]

Salesforce jumped 9.8% after the enterprise software firm raised its full-year adjusted profit outlook and said it did not see any material impact from the uncertain broader economic environment.

Victoria's Secret climbed 5.7% after the lingerie brand topped first-quarter profit estimates as costs fell.

Declining issues outnumbered advancers for a 2.80-to-1 ratio on the NYSE and for a 2.88-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week high and 29 new lows, while the Nasdaq posted 14 new highs and 87 new lows.