Wall Street's main indexes tumbled on Thursday as investors fretted the Federal Reserve's rate hike might not be enough to bring inflation under control and the U.S. central bank might need to take more drastic action.

The Nasdaq dropped 5.1% and the S&P 500 looked set to erase all of its gains from Wednesday after Google-parent Alphabet Inc, Apple Inc, Microsoft Corp, Meta Platforms, Tesla Inc and Amazon.com fell between 4.9% and 8.1%.

The U.S. central bank on Wednesday raised interest rates by half a percentage point as expected and Fed Chair Jerome Powell explicitly ruled out a hike of 75 basis points in a coming meeting.

Traders, however, on Thursday raised their bets on a 75 basis-point hike at the Fed's June meeting. [IRPR]

"Yesterday's explosion higher was completely comical. It was ridiculous. His comments did not justify the move that we saw," said Kenny Polcari, managing partner at Kace Capital Advisors.

"Part of what people are recognizing, very deep within his speech yesterday, is the concern that inflation is out of control, and the Fed is behind the eight ball. It is the concern that they may even have to make a more drastic move."

Worries about Fed policy moves, mixed earnings from some big growth companies, the conflict in Ukraine and pandemic-related lockdowns in China have hammered Wall Street recently, overshadowing a better-than-expected quarterly reporting season.

By 2:00 p.m. ET, the Dow Jones Industrial Average fell 1,075.08 points, or 3.16%, to 32,985.98, the S&P 500 lost 154.68 points, or 3.60%, to 4,145.49 and the Nasdaq Composite dropped 657.83 points, or 5.07%, to 12,307.03.

Only 22 constituents of the S&P 500 index were in the green by 2 p.m. ET, while the Nasdaq was on track for its biggest one-day percentage fall since June 2020.

One stock in positive territory was Twitter Inc, which gained 3%. Elon Musk revealed on Thursday that Oracle's co-founder Larry Ellison and Sequoia Capital were among investors that would back his takeover of the social media giant with $7.14 billion of financing.

All of the 11 major S&P sectors declined, with consumer discretionary leading the way. The index was dragged by Etsy Inc and eBay Inc, which slumped 18% and 10.7% respectively, after both forecast Q2 revenue would be below Wall Street's estimates.

The technology sector dropped 5.1%. Intuit Inc was among those weighing the heaviest, down 8.8% a day after agreeing to pay a $141 million settlement centered on deception claims around its TurboTax product.

The CBOE Volatility index, also known as Wall Street's fear gauge, climbed to 31.11 points.

The focus now shifts to the U.S. Labor Department's closely watched monthly employment report on Friday for clues on labor market strength and its impact on monetary policy.