Stocks on Wall Street fell the most this year and extended their losses to a fifth session.
Fresh worries over rising borrowing costs in Europe weighed on investor sentiment ahead of the start of earnings season.
First-quarter earnings for the S&P 500 companies are expected to show the slowest year-over-year growth since the financial crisis.
The Dow Jones Industrial Average was down 213.35 points, or 1.7%, to 12,716.24 at the close (8am NZ time).
The S&P 500 index was down 1.6% to 1358.62. It was the longest losing streak this year for both benchmarks.
The Nasdaq Composite was down 1.8% to 2991.22, though Apple shares hit a fresh record high and briefly pierced the $US600 billion level.
It is only the second company ever to have broken through this level (Microsoft also crossed above $600 billion in December 1999).
Apple shares need to close above $US643.52 to hit the $US600 billion in market value.
Growth-sensitive energy, materials and industrial stocks weakened, although all 10 sectors of the S&P 500 declined.
Alcoa is set to kick off the first-quarter earnings season when it releases its results after the close. Blue-chip laggards included Caterpillar, down 3.1%, Chevron, down 1.5%, and Exxon Mobil, down 2.0%.
Other markets: Europe down, Asia mixed
Most European markets resumed trading with sharp losses after a four-day weekend.
The Stoxx Europe 600 dropped 1.5% to a 10-week low of 252.57, as investors had their first opportunity to react to discouraging news about US employment released on Friday and rising borrowing costs for Spain and Italy.
Italian and Spanish stocks plunged; the benchmark Milan’s FTSE MIB index slid 5% to 14458.88, its biggest one-day drop since the beginning of November, while Madrid's IBEX 35 fell 3% to 7433.60, its lowest close since March 13, 2009.
The U.K.'s FTSE 100 index fell 2.2% to 5595.55, Germany's DAX index dropped 2.5% to 6606.43 and France's CAC-40 index slid 3.1% to 3217.60.
Asian markets were mostly lower. Japan's Nikkei Stock Average slipped 0.1% to 9538.02 for a sixth straight loss after the Bank of Japan left unchanged its key interest rate and the size of its asset-purchase programme.
Hong Kong's Hang Seng Index lost 1.1% to 20,356.24 and Australia's S&P/ASX 200 fell 0.6% to 4292.3. Korea's Kospi shed 0.1% to 1994.41.
But Taiwan's Taiex gained 0.5% to 7640.68 and the Shanghai Composite erased early losses to end 0.9% higher at 2305.86 after China posted a surprise trade surplus in March.
The Indian market also bucked trends, with the Bombay Stock Exchange's Sensex rising 0.1%, to close at 17,243.84.
Commodities: Oil down, gold up
Crude-oil futures settled at a two-month low, pressured by fresh worries over signs of slowing Chinese oil demand.
Light sweet crude for May delivery in New York fell $US1.44, or 1.4%, to settle at $US101.02 a barrel, the lowest level since February 15.
Brent crude fell sharply as traders hoped talks next week on Iran's nuclear programme will ease tensions about supply disruptions that have underpinned prices for several months.
The May contract on the ICE was $US2.77 lower at $US119.90 a barrel.
Gold futures turned positive in the final hour of trading and rallied 1% as it joined the US dollar and bonds as safe-haven instruments in a falling sharemarket.
Gold for June delivery added $US16.80 to end at $US1660.70 an ounce in New York, its highest settlement for the past three sessions.
Currencies: Yen rises
The yen climbed against the US dollar and other major currencies after the Bank of Japan kept its key rate on hold and refrained from announcing more policy easing.
The dollar fell below ¥81. The euro lost 0.7%, the Australian dollar fell 0.9% and the New Zealand dollar dropped 1.2% against the yen.
The euro was at $US1.3077 compared with $US1.3106 late on Monday.
The dollar was at ¥80.79 compared with ¥81.49, while the euro was at ¥105.65 from ¥106.83.
The pound bought $US1.5844 compared with $US1.5893, while the dollar fetched 0.9189 Swiss franc from 0.9172 franc.
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