Fears of rising interest rates returned to Wall Street, resulting in a steady selloff throughout the day on the New York Stock Exchange.
At the close, the Dow Jones Industrial Average was down 1033 points, just shy of Monday's 1100-point plunge that triggered a week of financial market turmoil.
Stocks in Europe also declined, as did US government bonds and commodities including oil, gold and copper.
Investors are reassessing valuations as they adjust their expectations for the pace of inflation and interest rate increases by the US Federal Reserve.
"If they raise rates more or faster, more hikes, that raises a little bit of concern because right the the economy has been all gas no brakes," Matt Schreiber, president and chief investment strategist at WBI Investments, told Bloomberg.
"The Fed's kind of this wild card because it could really pump the brakes pretty hard and cause the cost of borrowing to go up and really cause the economy to stall."
The Dow fell 1032.89 points, or 4.15%, to 23,860.46. The Nasdaq Composite Index shed 3.9% and the Standard & Poor's 500 Index declined 3.75%.
The Dow is now in correrction territory, having fallen more than 10% from its January high.
Bond yields rose with the benchmark 10-year US Treasury note hitting 2.848%, near its highest level since January 2014, from 2.843% on Wednesday,
Action in the bond market, which is reacting to fears that central banks will tighten monetary policy more quickly than expected, are creating the increased volatility in stocks.
"Volatility has eased but by no means is it low. It is still far above the long-term average and unease about higher interest rates remain," Randy Frederick, vice president of trading and derivatives for Charles Schwab, told Reuters.
"The outlook for the rest of the year remains positive and fundamentals remain strong. If the VIX falls below 20, then we should see some buying."
In the commodities market, US crude oil fell 1% to $US61.15 a barrel, extending declines after logging its biggest four-day percentage loss since May. Crude has come under pressure this week as data has pointed to a jump in US production and rising inventories.
"There's some big-money players that have really leveraged to the low rates forever, and they have to unwind those trades," Doug Cote, chief market strategist at Voya Investment Management, told Bloomberg. "They could be in full panic mode right now."
Twitter result impresses
Meanwhile, a burst of corporate earnings reports drove moves in individual stocks. Twitter shares jumped 13% after the social media company reported its first profitable quarter as a publicly traded company, while T-Mobile shares fell 3.9% after the wireless carrier posted lower-than-expected quarterly sales.
"I think they've [Twitter] come a long way," Richard Greenfield, an analyst at BTIG, told Bloomberg. "The product has dramatically improved. They're doing a better job of showing the right tweets to the right people at the right time." Greenfield added that "consumer or user happiness is making advertisers want to be there."
Tyson Foods rose 0.9% after the meat processor posted quarterly results that surpassed analysts' expectations, bolstered by its prepared foods business, and upgraded its full-year outlook.
Tyson lifted its adjusted earnings per share guidance for fiscal 2018 to between $US6.55 and $US6.70, which includes a benefit from a lower tax rate but excludes one-time cash bonuses, it said in a statement. That's up from a previous estimate for between US$5.70 and US$5.85.
"We drove solid results in each of our segments-beef, pork, chicken and prepared foods," Tom Hayes, Tyson's chief executive officer, said in a statement. "We grew topline sales, with our retail and food service sales both outpacing the industry.
"As we look to the long-term, we're confident in our ability to continue growing the business," Hayes noted. "Demand for protein continues to rise, and we're well-positioned to take advantage of that opportunity-and to fulfill our aspiration of sustainably feeding the world."
Yum buys into Grubhub
Grubhub soared 27.5% as the online food delivery company posted quarterly results that beat analysts' estimates and announced Yum Brands agreed to buy a $US200 million stake in the company.
Grubhub said it had teamed up with Yum in a new partnership to drive incremental sales to KFC and Taco Bell restaurants in the US through online ordering for pickup and delivery.
The partnership with Yum "will accelerate the expansion of our delivery network and amplify our diner acquisition efforts, raising consumer awareness of online ordering and driving more volume for all restaurants across our platform," Grubhub CEO Matt Maloney said in a statement.
In Europe, the Stoxx 600 Index fell 1.6%. Germany's DAX Index declined 2.2%, France's CAC40 Index retreated 1.5% and the UK's FTSE 100 index fell 1.1%.
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