Equity markets slid amid disappointing US corporate earnings and concern about the global impact of currency turmoil in emerging markets that prompted central banks of Turkey and South Africa to lift interest rates.
Meanwhile, investors are waiting for the end of the US Federal Reserve's meeting later today to see whether the central bank is easing its monthly bond-buying by another US$10 billion to US$65 billion, as is widely expected.
"I don't think it's completely pro forma," Eric Stein, portfolio manager at Eaton Vance in Boston, told Reuters. "But I do think the consensus of the committee is to taper, about in line with the last meeting."
In afternoon trading in New York, the Dow Jones Industrial Average slid 0.84 per cent, the Standard & Poor's 500 Index dropped 0.68 per cent, while the Nasdaq Composite Index shed 0.67 per cent.
Shares of Boeing and Coca-Cola led the slump in the Down, respectively down 6 per cent and 2.2 per cent most recently.
Boeing reported a 2014 profit outlook that failed to meet the mark.
"Boeing's orders have risen for four years straight coming out of the downturn, a bit longer than usual, and we think growth could start to slow," Christian Mayes, an aerospace analyst with Edward Jones & Co, told Bloomberg News.
Yahoo! also disappointed, sending its stock down 7.4 per cent.
Europe's Stoxx 600 Index finished the day with a 0.6 per cent decline from the previous close. The UK's FTSE 100 dropped 0.4 per cent, while France's CAC 40 sank 0.7 per cent and Germany's DAX fell 0.8 per cent.
The recent turmoil in emerging market currencies prompted action from Turkey's and South Africa's central banks.
In Turkey, the Borsa Istanbul 100 Index ended the day with a drop of 2.3 per cent. The country's central bank lifted its key interest rates at an emergency meeting in an attempt to stem the slide in the Turkish lira.
"Recent domestic and external developments are having an adverse impact on risk perceptions, leading to a significant depreciation in the Turkish lira and a pronounced increase in the risk premium," the central bank said in a statement. "The Central Bank will implement necessary measures at its disposal to contain the negative impact of these developments on inflation and macroeconomic stability."
The Central Bank of the Republic of Turkey raised the overnight lending rate to 12 per cent from 7.75 per cent, the overnight borrowing rate to 8 per cent from 3.5 per cent, and the one-week repurchase rate to 10 per cent from 4.5 per cent.
"The extremely aggressive nature of the rate hikes is a double-edged sword," Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, told Reuters. "It's highly questionable whether Turkey's central bank can maintain such an aggressively tight monetary policy in the face of a sharp slowdown in growth and two major elections later this year."
South Africa's central bank also acted in an effort shore up the rand, lifting its key rate for the first time in nearly six years. It raised the repurchase rate to 5.5 per cent from 5 per cent.
"Significant currency depreciation and weaker growth prospects are also evident in a number of other large emerging economies, particularly Brazil, Russia and Turkey, while the outlook for the Indian economy appears to have improved somewhat," South Africa's central bank said in a statement.
"While the recent rand weakness is part of a general emerging market phenomenon, it has been reinforced by idiosyncratic factors including declining terms of trade, ongoing labour disputes, and the higher-than-expected current account deficit in the third quarter."