At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.28%, the S&P 500 index ended down 0.50%, while the Nasdaq Composite index fell 0.18%.
The Fed is currently buying USD85 billion in assets from banks a month, a monetary stimulus tool known as quantitative easing that weakens the greenback and floods the economy with liquidity to spur recovery and job demand.
Stocks rise as a side effect to such policies, though Federal Reserve Bank of San Francisco President John Williams suggested earlier that despite hit-or-miss economic indicators, monetary authorities may begin to scale back the program later this year.
Philadelphia Fed President Charles Plosser added separately that the Fed should consider scaling back the program next month.
The news sent stocks dipping by wiping out earlier sentiments that weak indicators may convince the Fed to keep loose policies in play longer than expected.
The Federal Reserve Bank of Philadelphia reported earlier that its manufacturing index fell to -5.2 in May from 1.3 in April.
Analysts were expecting the index to improve to a reading of 2.4 in May, which fueled earlier sentiments that loose policies at the Federal Reserve aren't going to wind down anytime soon as before comments out of the U.S. central banks suggested otherwise.
The Department of Labor said earlier Thursday that the number of individuals filing for initial unemployment assistance in the U.S. rose by 32,000 to 360,000 last week, well above expectations for an increase of 2,000 to 330,000.
Soft inflation data took the steam out of the dollar as well.
The country's consumer price index fell 0.4% in April from March, worse than expectations for a 0.2% decline, down for the second consecutive month.
Year-on-year inflation rates in the U.S. came to 1.1%, just shy of market expectations for a 1.3% reading and well below the Federal Reserve's 2% target.
Spotty data out of the housing industry dampened spirits as well.
The Commerce Department said the number of building permits issued in the U.S. rose 14.3% to 1.017 million units in April, well above expectations for a 6.2% increase to 945,000 units.
U.S. housing starts fell by 16.5% last month to 853,000 units, outpacing expectations for a decline of 4.9% to 973,000.
Thursday's data came in wake of soft industrial output and producer-price reports released on Wednesday.
Leading Dow Jones Industrial Average performers included Cisco, up 12.64% on better-than-expected earings, Hewlett-Packard, up 1.91%, and UnitedHealth Group, up 0.84%.
The Dow Jones Industrial Average's worst performers included Walt Disney, down 1.79%, Wal-Mart, down 1.73%, and Home Depot, down 1.44%.
European indices, meanwhile, finished largely lower.
After the close of European trade, the EURO STOXX 50 fell 0.01%, France's CAC 40 fell 0.08%, while Germany's DAX 30 finished up 0.09%. Meanwhile, in the U.K. the FTSE 100 finished down 0.09%.
On Friday, the U.S. will release preliminary data from the University of Michigan on consumer sentiment and inflation expectations.