The Dow Jones industrial average fell as much as 500 points in early trading, bringing the index down 10% from the record high it reached on January 26.
Torsten Slok, chief global economist at Deutsche Bank, told the Financial Times: "Markets are coming to the conclusion that the USA economy is close to overheating and therefore that the risks of inflation are bigger than the risks of a recession".
The S&P 500 e-minis, also derailed by growing concerns over the rise of US government bond yields, were down 9 points, or 0.35 percent, while the Nasdaq 100 e-minis NQc1 were down 21.25 points, or 0.33 percent. Still, traders are bracing for more market volatility, wondering if the Fed will hike rates more than three times this year, the current target.
He said that the signs of inflation and rising rates were not as bad as they looked, but after the market's big gains in 2017 and early 2018, stocks were overdue for a drop. The Standard & Poor's 500 index (S&P 500) declined 4.1 percent to 2,648.94 points.
That economic growth could be partly responsible for the stock market declines.
"The bond market has definitely got the stock market's attention", said Ryan Detrick, senior market strategist at LPL Financial.
Banks were hit hard, with bond yields and interest rates nosediving, while health care, technology and industrial companies also took losses. The Nasdaq composite edged up 10 points, or 0.2 percent, to 7,061.
In small-caps, the Russell 2000 Index closed at 1,507.97 for a gain of 0.80 points or 0.05%.
The Reserve Bank of Australia, the country's central bank, said it would leave cash rates (the interest rate that banks pay to borrow) unchanged at 1.5 percent, citing household consumption as a "continuous source of uncertainty". The yield on the 10-year U.S. Treasury, for example, has risen to over 2.7% from just around 2% in September.
The blue-chip stock average's recent drubbing, which follows its record 1,175-point drop Monday, has been fueled by fears that a long period of low interest rates and tame inflation that have boosted the economy and fueled a rapid rise in stock prices may be nearing an end as economic conditions improve. Many experts are saying the pullback was inevitable.
Asia's biggest market - Japan's Nikkei 225 Index - lost 4.7 per cent, while Hong Kong's Hang Seng plunged over five per cent. The dollar index last rose 0.13%, with the euro up 0.06% to $1.2384.
- Lakers acquire Isaiah Thomas from Cavs
- A chilly day, and breezy at times Thursday
- 'I had no idea my print was for Justin Timberlake'
- South Korean firms hope North-South complex will reopen
- White House warns of midnight shutdown as spending bill stalls in Senate
- Renuka Chowdhury Moves Privilege Motion Against Kiren Rijiju For Posting 'Objectionable' Video
- Rodgers sinks birdie putt on 18th hole at Pebble Beach Pro
- NEET 2018 UG Notification Released
- North Korea stages military parade on eve of Olympics
- Storm barrels through US Midwest with snow and frigid temperatures