Stocks on both sides of the Atlantic slumped along with commodities, as disappointing data from China, the world's second-largest economy, sparked concern about the pace of global growth.
China's gross domestic product increased 7.7 per cent in the first quarter from a year earlier, according to the National Bureau of Statistics in Beijing. That's down from 7.9 per cent in the previous quarter and short of the 8 per cent expansion economists had predicted.
China's industrial output in March also failed to live up to expectations.
There were dicey signals for the world's largest economy too. The US Federal Reserve Bank of New York's general economic index fell more than expected to 3.1 in April, from 9.2 in March, while US homebuilder confidence unexpectedly dropped this month, the two latest in a string of recent reports indicating the American recovery is fragile.
In afternoon trading in New York, the Dow Jones Industrial Average dropped 1.21 per cent, the Standard & Poor's 500 Index sank 1.67 per cent, while the Nasdaq Composite Index slid 1.81 per cent.
"Liquidation is under way across equities and commodities, sparked by fears that the global economy is set to slow," Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York, told Reuters.
Commodities including gold, silver, palladium and oil declined. Gold, already in a bear market, plunged more than 9 per cent today, while silver tumbled more than 11 per cent.
The slide in gold, with spot gold touching a two-year low of US$1,384.69 an ounce, is set to continue.
"We are entering a phase of additional long liquidation by ETF [exchange-traded-funds] investors and short-selling from hedge funds, which will continue in the foreseeable future," Saxo Bank senior manager Ole Hansen told Reuters.
Donald Selkin, who helps manage about US$3 billion of assets as chief market strategist at National Securities in New York, agrees.
"The perception is that gold is not really needed as a safe haven," Selkin told Bloomberg. "People are looking at the stock market and they're stunned, and there's no inflation. So people are saying 'What do we need gold for?'"
In Europe, the Stoxx 600 Index ended the day with a 0.7 per cent decline from the previous close. Benchmark stock indexes in Frankfurt, Paris and London closed lower too, down 0.4 per cent, 0.5 per cent and 0.6 per cent respectively.
There was some good news. Citigroup posted better-than-expected profit, bolstering its shares, last up 1.45 per cent.