Stocks pared losses toward the end of the session on Thursday. The benchmark S&P 500 index hit a key technical level - 2,700 - that likely prompted buying, said Michael Antonelli, managing director of institutional sales trading at Robert W. Baird in Milwaukee.

Still, among the S&P 500's major sectors, only the defensive utilities and real estate indexes were positive, illustrating Thursday's risk-off sentiment.

The Philadelphia SE Semiconductor Index tumbled 2.2 per cent. Chipmakers get a large chunk of their revenue from Chinese customers.

Disappointing financial forecasts from several US companies, including Twitter Inc, have also given investors pause.

More than half of S&P 500 companies have reported fourth-quarter results, with about 71 per cent beating profit estimates, according to IBES data from Refinitiv. However, current-quarter earnings growth estimates have shrunk to 0.1 per cent from 5.3 per cent at the start of the year.

"As earnings reports come in, there's a heightened concern that future revenue growth as well as earnings over the course of 2019 won't be as robust as investors expected," said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors in Florham Park, New Jersey.

The Dow Jones Industrial Average fell 220.77 points, or 0.87 per cent, to 25,169.53, the S&P 500 lost 25.56 points, or 0.94 per cent, to 2,706.05 and the Nasdaq Composite dropped 86.93 points, or 1.18 per cent, to 7,288.35.

Energy stocks fell 2.1 per cent, the largest percentage drop among S&P 500 sectors, as crude prices sank on worries of tapering demand because of trade tensions.

Twitter shares tumbled 9.8 per cent after the social media company forecast that revenue in the first quarter would be weaker than expected and that its full- year operating costs would rise.

SunTrust Banks Inc shares jumped 10.2 per cent after the bank agreed to be bought for about $US28 billion ($39 billion) in stock by fellow regional lender BB&T Corp, whose shares rose 4.0 per cent.

Declining issues outnumbered advancing ones on the NYSE by a 2.34-to-1 ratio; on Nasdaq, a 2.08-to-1 ratio favoured decliners.

The S&P 500 posted 16 new 52-week highs and two new lows; the Nasdaq Composite recorded 32 new highs and 34 new lows.

Volume on US exchanges was 7.82 billion shares, compared with the 7.49 billion- share average over the last 20 trading days.

Reuters