US stocks sink over 2% as Fed officials eye rate hike

Wall Street stocks suffered their sharpest losses Friday since the Brexit vote after Federal Reserve officials signaled the US central bank could hike interest rates as soon as this month.

The Dow Jones Industrial Average fell 2.1 percent to 18,085.45.

The broad-based S&P 500 shed 2.5 percent to 2,127.81, while the tech-rich Nasdaq Composite Index dropped 2.5 percent at 5,125.91.

The losses were broad-based, hitting industrials and energy shares especially hard, after Boston Fed President Eric Rosengren said in a speech that higher rates were needed to prevent the economy from overheating.

A second Fed official, Governor Daniel Tarullo, signaled openness to a rate hike in 2016 in an interview with CNBC.

"Given the European Central Bank commentary yesterday as well as some Fed speakers today, it appears more likely that the Fed and the world is closer to lessening the amount of easy money," said David Levy, portfolio manager at Republic Wealth Advisors.

US stocks have rallied to records in the last two months after plunging following the June 23 British vote to exit the European Union. 

But analysts have cautioned that a correction was possible given the importance of central bank-generated liquidity to the stock market gains.