NEW YORK (TheStreet) -- Wednesday was a kick-you-in-the-guts kind of day after durable goods orders missed estimates by a wide margin. Markets were slow to react but by midday there was red up and down Wall Street. 

The S&P 500 dropped 1.5%, the Dow Jones Industrial Average fell 1.5%, or 290 points, and the Nasdaq slid 2.3%.

"It's jitters as to the [Federal Reserve] rate hikes and kind of the divergence in central bank policy ... This year we're going to see more volatility than we've seen in the last three or four years," said Luis Gonzalez, managing director of Snowden Lane Partners, on a call.

Benchmark indexes have whipsawed from near-record highs and back into the red over the past week since the Fed removed its "patient" language from its policy statement and reiterated data dependence.

"If you were to shut your eyes on Jan. 1 and open your eyes and look at your statement on Dec. 31, I think you'll see that the markets were positive. But you're going to see some big swings through the course of the year," Gonzalez added.

The energy sector was the sole survivor of the selloff as oil prices rallied on increased fighting in Yemen which threatened oil shipments from the Middle East. West Texas Intermediate surged 3.3% to $49.06 a barrel on reports Yemen's president had fled the city of Aden as militants drew closer to a oil chokepoint in the region.

The rally came despite U.S. crude inventories adding 8.2 million barrels over the week ended March 20, higher than an estimated increase of 5.1 million barrels.

Major oilers Exxon Mobil (XOM) - Get Exxon Mobil Corporation Report, Chevron (CVX) - Get Chevron Corporation Report, Royal Dutch Shell (RDS.A) , and BP (BP) - Get BP p.l.c. Sponsored ADR Report were all higher, while the Energy Select Sector SPDR ETF (XLE) - Get Energy Select Sector SPDR Fund Report jumped 1.4%. 

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The Nasdaq was particularly hard hit on Wednesday with highly volatile biotech companies and chipmakers sinking the tech-heavy index. Among the worst-performing semiconductor stocks, Advanced Micro Devices (AMD) - Get Advanced Micro Devices, Inc. Report, Nvidia (NVDA) - Get NVIDIA Corporation Report sank and Micron Technology (MU) - Get Micron Technology, Inc. (MU) Report all plummeted, while the iShares PHLX Semiconductor ETF (SOXX) - Get iShares PHLX Semiconductor ETF Report tanked 4.7%.

In biotech, Alexion (ALXN) - Get Alexion Pharmaceuticals, Inc. Report, Ariad (ARIA)  and NewLink Genetics (NLNK) - Get Newlink Genetics Corporation Report were big losers, while the iShares NASDAQ Biotechnology Index ETF (IBB) - Get iShares NASDAQ Biotechnology ETF Report slid 4.1%.

Durable goods orders in the U.S. unexpectedly slipped 1.4% to $231.3 billion in February, an unexpected drop compared to estimates of a 0.4% increase. In January, durable goods increased 2%.

"This is essentially three out of four of the last months [of missed expectations]. We haven't had a run like this since 2008/early 2009," said James Abate, chief investment officer at Centre Funds, over the phone. "This is quite consistent with our view that the economy is actually weakening and not strengthening."

U.S. Treasury yields rose on Wednesday following a weak auction for new five-year notes worth a total $35 billion with demand hitting its lowest level since July 2009. The benchmark 10-year U.S. Treasury notes fell 13/32 in price to yield 1.92%.

Kraft (KRFT) shares were a bright spot on Wednesday after the company announced plans to merge with privately held Heinz to create Kraft Heinz Co. Kraft shares surged more than 35%.

Heinz, owned by private-equity firm 3G Capital and Warren Buffett's Berkshire Hathaway (BRK.A) - Get BRK.A Report, will hold a 51% stake in the new company. The combined companies will form the third-largest food and beverage company in North America.

In more deals news, computer imaging company Lexmark (LXK) agreed to buy software developer Kofax (KFX) for about $1 billion, or $11 a share. Lexmark shares popped 6.1% and Kofax rocketed 46% higher.

There is more uncertainty for Europe on reports Greece will run out of money by April 20, according to Reuters. The unofficial deadline puts even more pressure on Greek Prime Minister Alexis Tsipras to resolve discussions with European Union creditors sooner rather than later. This week Tsipras met with German Chancellor Angela Merkel and agreed to present a comprehensive list of reforms by Monday.