U.S. stocks closed lower on Wednesday in a rocky session after the release of the minutes from the Federal Reserve's January meeting pushed yields on the benchmark 10-year U.S. Treasury note to a four-year high.

After the Fed left interest rates unchanged in January, minutes showed the U.S. central bank's rate-setting committee grew more confident in the need to keep raising rates, with most believing inflation would perk up amid an improving economic landscape.

Stocks initially reacted positively, with each of the major Wall St indexes touching session highs. Stocks began to pare gains, however, as bond yields climbed to a four-year high of 2.957 per cent on the likelihood of further rate increases this year.

"The Fed meeting minutes indicated Fed members weren't too worried about inflation, so that was music to the market's ears," said Michael Arone, Chief Investment Strategist at State Street Global Advisors in Boston.

"Since then the market is recognizing the meeting happened at the end of January and since then we have had the strong jobs report, the average hourly earnings pickup, the CPI figures and they also said it is going to be appropriate to raise rates."

Expectations for a quarter-point hike at the Fed's next meeting in March are currently 93.5 percent, according to Thomson Reuters data. The Fed has forecast three rate hikes in 2018.

The Dow Jones Industrial Average fell 166.97 points, or 0.67 per cent, to 24,797.78, the S&P 500 lost 14.93 points, or 0.55 per cent, to 2,701.33 and the Nasdaq Composite dropped 16.08 points, or 0.22 per cent, to 7,218.23.

After inflation worries knocked the S&P 500 down more than 10 per cent from its Jan. 26 high, stocks had rebounded in recent sessions as yields on the 10-year U.S. Treasury note had stabilized around the 2.9 per cent mark. Even with the recent rally, the index has been unable to convincingly hold above its 50-day moving average, seen as a key support level.

"It is unusual for it to make that V-shaped recovery that it did and keep going," said Jeff Zipper, managing director at the U.S. Bank Private Client Reserve in Palm Beach, Florida.

"We keep hearing about a possible re-test of that bottom but we will see how it holds up."

The prospect of higher rates and an unexpected fall in January U.S. existing home sales dented the real estate sector, off 1.81 per cent. Other sectors seen as bond proxies due to their high dividend yields, utilities and telecoms, also dropped more than 1 per cent.

Benchmark 10-year notes last fell 13/32 in price to yield 2.9408 per cent, from 2.893 per cent late on Tuesday.

Declining issues outnumbered advancing ones on the NYSE by a 1.17-to-1 ratio; on Nasdaq, a 1.24-to-1 ratio favored advancers.

Volume on U.S. exchanges was 6.96 billion shares, compared to the 8.49 billion average over the last 20 trading days. 

CANADIAN MARKETS

Canada's main stock index closed at a 2-1/2-week high on Wednesday, led by financials and industrials, with all sectors but technology posting gains.  

The Toronto Stock Exchange's S&P/TSX composite index closed up 84.57 points, or 0.55 per cent, higher at 15,524.01, its strongest close since Feb. 2.

Canadian stocks bucked a downward trend in global stocks that were driven lower by a stronger U.S. dollar and rising government bond prices after minutes of the Federal Reserve's January policy meeting showed confidence in the need to keep raising interest rates.

The dollar index, which tracks the greenback against a basket of major peers, rose 0.4 per cent to 90.08. It advanced 0.4 per cent to $1.2702, its highest level this year versus the Canadian dollar.  * The global stocks benchmark lost 0.2 per cent, while the S&P 500 pulled back 0.55 per cent.

Despite a 0.47 per cent retreat in gold futures, reversing an earlier increase, Kirkland Lake Gold        , Guyana Goldfields and OceanaGold Corp retained their gains to be among the 10 biggest advancers on the Toronto exchange.

The biggest gainer was logistics company TFI International , which advanced 10.5 per cent after brokerages including Desjardins, Laurentian Bank Securities and Cowen & Co upgraded the company's rating and target price after its better-than-expected fourth-quarter earnings.

Shopify Inc was the worst performer on the index, sliding 6.7 per cent after it priced a US$657.6 million share offering. It closed at a record high on Tuesday.

Among the most active Canadian stocks by volume were Bombardier, which closed down 1.8 per cent at $3.85, after touching its highest level since January 2015 earlier in the session, Element Fleet Management, which recovered 9.2 per cent to $4.75 after earlier hitting its lowest since July 2012, and Canopy Growth, down 2.9 per cent at $24.74.

There were 182 advancing issues and 53 decliners, while 15 were flat.