U.S. stocks closed sharply lower on Thursday as investor anxiety increased ahead of Friday's consumer price data, which is expected to show that inflation remained high in May. Selling intensified near the close. Growth stock giants led the decline, with Apple and Amazon down 3.6% and 4.2%, respectively, causing the biggest drag on the S&P 500 and Nasdaq. All 11 sectors of the S&P 500 closed lower, with communication services stocks and technology stocks falling the most.

The yield on the 10-year U.S. Treasury note touched its highest since May 11 at 3.073%, which heightened tensions. The recent sharp rise in oil prices also weighed on sentiment ahead of Friday's U.S. Consumer Price Index (CPI) report. "We're bracing for possible news on inflation tomorrow," said Peter Tuz, president of Chase Investment Counsel, "and I think the data will be mixed. If headline inflation is high, but core inflation shows some sort of decline, I actually think the market could rally as a result because the data will show that inflation is falling back slightly."

The data is expected to show that CPI rose 0.7 percent in May, with core CPI excluding volatile food and energy rising 0.5 percent. By the close of trading, the Dow Jones Industrial Average was down 638.11 points, or 1.94%, to 32,272.79; the S&P 500 was down 97.95 points, or 2.38%, to 4,017.82; and the Nasdaq was down 332.05 points, or 2.75%, to 11,754.23. All three indices posted their largest single-day percentage declines since mid-May. The S&P 500 is down 15.7% so far this year, and the Nasdaq is down about 25% cumulatively.

Higher-than-expected inflation data may increase concerns that the Fed will raise interest rates more aggressively than previously expected. The Fed has raised short-term interest rates by 75 basis points so far this year and intends to continue to raise rates by 50 basis points at next week's meeting, and is also expected to raise rates by 50 basis points in July.

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