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Stocks slide; Dow posts first 3-day losing streak of year

Stocks finished near session lows in choppy trading on Wednesday, with the Dow posting its first three-day losing streak this year, amid lingering worries of Fed tapering.

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The dollar regained its footing against the yen, after dropping as low as 95.16 earlier in the session. The dollar index, which measures the greenback's strength against a basket of currencies, touched its lowest level since February.

"Everyone's watching the yen," said Joe Saluzzi, co-manager of trading at Themis Trading. "Since 'Abenomics' took place in November, you can overlay the S&P 500 against the yen chart and see a nice correlation—so it makes sense to me that when the reverse happens, it should also happen in the stock market. The currency is the leader, not the laggard and it's all by central bankers." His reference was to Prime Minister Shinzo Abe's efforts to reform the Japanese economy.

The Dow Jones Industrial Average finished down 126 points at 14,995.23, dragged by American Express and IBM, logging its first three-day losing streak this year. The blue-chip index had opened up more than 100 points but quickly erased its gains.

The S&P 500 and the Nasdaq also closed in the red, extending their losses from the previous session. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, spiked above 18.

All S&P sectors reversed their gains to trade lower, dragged by consumer discretionaries, financials and utilities.

Asian shares trimmed losses, after falling sharply in the previous session when the Bank of Japan refrained from introducing measures to ease market volatility. Financial markets in Hong Kong and China were shut on Wednesday for the Dragon Boat holidays, and will reopen on Thursday.

In Europe, shares traded higher after the German government encouraged the country's highest court to dismiss a legal challenge to the European Central Bank's government bond-buying program. German Finance Minister Wolfgang Schaeuble said he did not think the ECB had violated its mandate, and that ECB policy was not subject to German law.

The demonstration in Turkey grew more chaotic after police cleared Taksim Square early Wednesday. Prime Minister Tayyip Erdogan was expected to meet with organizers of the anti-government protests which have spread throughout Turkey over the past two weeks.

"Riots in Istanbul, central banks raising stop signs, bond yields on the rise and equity markets skidding; brace yourselves, we are in for a very rough ride over the coming weeks," wrote Evan Lucas, market strategist at IG. "All this news has led to one thing and one thing only — high volatility. The current 'correction' in the market is heading towards a confidence killer, and this will only see volatility moving even higher."

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Treasury prices declined after the government sold $21 billion in 10-year notes at a high yield of 2.209 percent. The bid-to-cover ratio, an indicator of demand, was 2.53.

Weekly mortgage applications rose for the first time in a month as a surge in interest rates pushed prospective home buyers to act, according to the Mortgage Bankers Association.