Several major companies, including Exxon Mobil and Google's parent company, Alphabet, sank after reporting weak earnings. The index's five-day rout topped 3 percent - marking its first pullback of at least that much in a record 404 days.
The downturn also followed a long period of unprecedented calm in the market.
The big change in the market mentality is the fear that borrowing rates, which have been near record lows since the financial crisis and were a catalyst behind the current nine-year bull market for stocks, might be on the verge of moving dramatically higher.
The Standard & Poor's 500 index fell 58 points, or 2.1 percent, to 2,763 as of 3:07 p.m.
Sony, which recently posted stellar quarterly earnings, especially in its entertainment division, was the only major media conglomerate to trade higher on Friday, closing up 6 percent.
Friday's plunge knocked the Dow to 25,520.96, a more than 2.5 percent loss from the previous session.
The Nasdaq fell 144 points, or 2 percent, to 7,240. But the stock fell 4.4 percent after the company said it expects profit margins of 38 percent to 38.5 percent, tighter than the expected 38.9 percent.
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"The pace of rate increases is more important than the level", Manulife Asset Management senior portfolio manager Nate Thooft said.
The market has surged in the "Trump rally" as analysts priced in projected higher earnings from the prospect of corporation-friendly tax cuts, regulatory rollbacks and infrastructure investment under the new administration.
More: 401 (k) investors: Is a "melt-up" happening in the stock market? On Friday, the 10-year Treasury yield jumped to as high as 2.85 percent, a four-year high, putting pressure on the stocks. The rate was at 2.41 per cent four weeks ago and 2.66 per cent on Monday.
"It's a legitimate concern, when inflation spikes up a little bit, that people should evaluate how is this going to affect profits and how is this going to affect the Fed", said Jonathan Golub, chief US equity strategist at Credit Suisse.
Concerns about rising rates and inflation were heightened by a robust U.S.jobs report released Friday that showed the largest year-over-year percentage gain in average hourly wages, 2.9 percent, since June 2009. Investors are rattled by lackluster earnings reports in tech sector and big oil as well as a selloff in government bonds.
US hiring picked up in January and wages rose at the fastest annual pace since the recession ended, as the economys steady move toward full employment extended into 2018. Meanwhile wages rose sharply, suggesting employers are competing more fiercely for workers.