The Dow Jones industrial average fell 1.1 percent, the broad S&P 500 index fell 0.4 percent and the tech-heavy Nasdaq composite index fell 0.9 percent.
Earlier on Friday, new figures showed US producer prices excluding food and energy rose at an annual rate of 3.6 percent in January, significantly higher than analysts had expected.
The statistics reduce the likelihood of an imminent US interest rate cut.
Nvidia, which beat expectations with its latest quarterly report earlier this week, continued to fall, closing down just over 4 percent. According to CNBC, investors are skeptical about the tech giant's latest deal with OpenAI, and there is ongoing anxiety about AI stocks, along with doubt over whether cloud service companies' lavish spending on AI technology will pay off.
Paramount Skydance went against the tide, rising by around 20 percent after reports that the company had effectively reached an agreement with Warner Bros for a takeover.
