Wall Street sinks 1% on Europe, Wal-Mart

US stocks have closed sharply lower as investors digested a series of key data releases and an earnings report from retail bellwether Wal-Mart.

At the closing bell, the Dow Jones Industrial Average sunk 167.16 points lower, or 1.01%, to 16,446.81.

The broad-based S&P 500 weakened 17.68 points, or 0.94%, to 1,870.85, while the tech-heavy Nasdaq Composite Index lost 31.33 points, or 0.76%, to 4,069.29.

The decline came as investors bet that improving jobs data and climbing inflation could force the US Federal Reserve to lift rates earlier than what is currently expected.

Driving this belief was news weekly jobless claims had fallen to a seven-year low of 297,000 last week, which bodes well for the next official monthly jobs report.

Inflation, too, was in the limelight as the consumer price index rose 0.3% in April, its highest rate in almost a year. The report quashed fears of deflation, in the near-term at least.

Meanwhile, industrial production came short of expectations, disappointing in April after a strong March result.

In company news, Wal-Mart stock gave up 2.5% after its latest earnings and sales numbers filed to flatter. The world's largest retailer has faced numerous challenges in recent times, with growth in online retail just one of the major headwinds.

Elsewhere, the eurozone could only muster 0.2% growth in the first quarter, which again brought into question the strength of the recovery in the region.