Equities on both sides of the Atlantic tumbled overnight, as energy stocks fell with the price of oil and as investors further unloaded tech stocks amid concern about the outlook for corporate profits amid a slowing global economy.
In 12.28pm trading in New York, the Dow Jones Industrial Average dropped 1.9 percent, while the Nasdaq Composite Index shed 2.1 percent. In 12.14pm trading, the Standard & Poor's 500 Index declined 2.1 percent.
Slides in shares of Visa and those of Goldman Sachs, last down 6.6 percent and 5.8 percent respectively, led the drop in the Dow.
"Investors can't make up their minds about the global economy, but the risk of recession and deflation is rising," Francois Savary, the chief investment officer of Prime Partners, a Geneva-based investment manager, told Bloomberg.
"It's not enough that valuations have receded quite significantly and earnings haven't been too bad-sentiment is very low and there isn't much visibility right now. That's frightening," Savary noted.
Investors fled to the perceived safety of US Treasuries, pushing yields on the 10-year note eight basis points lower to 1.76 percent.
The turmoil has bolstered the level of scrutiny for US Federal Reserve Chair Janet Yellen's semi-annual testimony to Congress on Wednesday and Thursday.
"This will be one of the more closely watched and scrutinised testimonies in some time as the market tries to gauge whether March is still in play for another Fed rate increase," wrote economists at RBC Capital Markets, Reuters reported. "Given the lack of any real calming in the markets, we think the odds that Yellen heavily promotes a March move are slim."
As the price of oil dropped again-West Texas Intermediate crude last traded at US$30.21 a barrel while Brent was at US$33.49-so did shares of energy companies.
Shares of Chesapeake Energy, a natural gas producer, sank as much as 51 percent amid reports it had hired restructuring lawyers. The company said it has no plans to pursue a bankruptcy. The stock last traded 34 percent lower.
Williams Cos, a gas pipeline company, dropped 26 percent.
Tech stocks, including Facebook, Amazon, Netflix, and eBay, also slid amid concern about valuations.
"What you've seen regarding technology and other sectors is that the (higher) valuations are being ratcheted back down closer to the underlying fundamentals that are going to support their growth, if it's there," Ryan Larson, head of US equity trading at RBC Global Asset Management in Chicago, told Reuters.
In Europe, the Stoxx 600 Index ended the session with a 3.5 percent decline from the previous close. The UK's FTSE 100 Index sank 2.7 percent, France's CAC 40 Index slumped 3.2 percent, while Germany's DAX Index plunged 3.3 percent.
Bank stocks suffered some of the biggest hits in Europe.
The euro-zone Sentix investor confidence index fell more than anticipated in February, and sank to the lowest in more than a year.