Equities on both sides of the Atlantic slid overnight, while US Treasuries and German bunds gained, amid concern about a global economic slowdown as the Federal Reserve considers a hike in interest rates.
In New York trading at about 1.27pm, the Dow Jones industrial average dropped 1.6 per cent, the Standard & Poor's 500 Index sank 2 per cent, while the Nasdaq Composite Index fell 2.4 per cent.
Slides in shares of UnitedHealth and those of Goldman Sachs, last down 3.8 per cent and 3.7 per cent respectively, led the drop in the Dow. US biotech stocks continued their tumble, first spurred last week by Democratic presidential candidate Hillary Clinton's plans to tackle the industry's "price gouging".
Meanwhile, New York Fed President William Dudley said US policy makers will probably lift the federal funds rate target this year, potentially as soon as next month's meeting.
"The economy is doing pretty well," Dudley said at an event hosted by the Wall Street Journal. "My expectation is that we probably will raise interest rates later this year."
To be sure, "international developments have created a little bit more uncertainty," Dudley noted.
Indeed, investors are seeking cover in the perceived safety of fixed-income securities.
US Treasuries rose, pushing yields on the 10-year note down 6 basis points to 2.10 percent, while in Europe yields on German 10-year bunds dropped 6 basis points to 0.59 percent.
Europe's Stoxx 600 Index finished the session with a 2.2 percent slide from the previous close. France's CAC 40 Index retreated 2.1 per cent, the UK's FTSE 100 Index declined 2.5 percent, and Germany's DAX Index shed 2.8 per cent.
"We are in a chaotic market, lots of volatility," James Gaul, a portfolio manager at Boston Advisors, told Bloomberg. "Earnings are going to be really important this quarter considering the macro backdrop and general global fears as well as the concerns about the Fed potentially raising interest rates as early as next month."
The latest US economic data were mixed. A Commerce Department showed consumer spending rose a better-than-expected 0.4 per cent in August, following an upwardly revised 0.4 per cent gain in July.
"These data underscore the ongoing health of the consumer sector," John Hoff, an economist at RBS Securities, told Reuters.
A National Association of Realtors report showed the pending home sales index unexpectedly fell, declining 1.4 percent to 109.4 in August.
"Pending sales have levelled off since mid-summer, with buyers being bounded by rising prices and few available and affordable properties within their budget," NAR chief economist Lawrence Yun said in a statement.
In Europe, shares of Glencore plummeted 29 per cent amid concern the company might crumble under its debt load and weakening commodity prices. Shares of other major miners were caught in the downdraft; base metals price also sank.
"If major commodity prices remain at current levels, our analysis implies that, in the absence of substantial restructuring, nearly all the equity value of both Glencore and Anglo American could evaporate," analysts at Investec wrote, according to Reuters.
Shares of Volkswagen dropped 7.5 percent as the fallout of its emissions tests scandal continues, leaving the company facing billions of dollars of fines.