Technology and retail companies continued to stumble. Markets in France, Britain and Germany fell after stocks declined sharply in Hong Kong and Japan.
Bond prices rose as the recent surge in yields attracted the attention of some investors.
Thursday's losses in the US followed steep declines overseas. But the decline in yields didn't help stocks Thursday.
At the same time, the burgeoning trade war between the United States and China has been creating uncertainty on corporate earnings.
The blue-chip index plunged more than 830 points - or 3.2 percent - at its close as traders fretted about raising interest rates and the sell-off of once-high-flying tech stocks.
AMD (NASDAQ:AMD) suffered an especially brutal day today with a drop of over 8 percent.
The Dow Jones Industrial Average has fallen more than 500 points, just one day after the market was hit with its worst day since February. The Nasdaq composite, which has a high concentration of technology stocks, tumbled 316 points, or 4.1 percent, to 7,422.
Banks are taking some of the biggest losses.
The Russell 2000 index of smaller-company stocks shed 2.9 percent, to 1,575.41. Even utility stocks, which tend to pay big dividends, fell slightly Wednesday. Over the past two days, it has lost more than 1,300 points.
On Wall Street, the Philadelphia Semiconductor index tumbled 4.46 percent after Swiss vacuum valve maker VAT Group said demand was softening from chip equipment makers.
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"It's a risk-off environment as investors are focusing on spiking yields and taking profits off the table as they are concerned about whether the bull market is actually coming to an end", said Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada.
It was the fifth negative day for the S&P 500, and the longest losing streak during the Trump presidency. It has climbed 28 percent since Donald Trump was elected. "They're so tight. I think the Fed has gone insane", he told reporters while traveling in Pennsylvania on Wednesday.
For example, a yield rise in a month of one standard deviation or less, which would be 20 basis points now, is manageable for stocks, Goldman said in a note last week.
But a recent International Monetary Fund warning on global growth taking a hit from trade disputes has hit confidence in the stock market, as has US Treasury yields at more than 7-year highs, signalling a tightening of capital globally. On Wednesday, the 10-year yield once again touched its highest level in seven years. The S&P 500 closed at 2,728.38, down 2 percent. Brazil's Bovespa lost 2.5 percent and the Merval in Argentina sank 2.2 percent. The Justice Department approved the $69 billion deal on Wednesday. The Kospi in South Korea fell 3.6 percent to 2,148.97. Microsoft and Alphabet, Google's parent company, held up better than the rest of the market.
Netflix shares fell by 6pc and have now fallen by 12pc in the last five days.
Concerns about U.S. -China ties weighed heavily, too.
Oil futures fell. USA crude gave up $1.27 to $71.90 a barrel.
The dollar index fell 0.17 percent, with the euro up 0.25 percent to $1.1518.
Wholesale gasoline lost 4.3 percent to $1.93 a gallon. Australia's S&P/ASX 200 slipped 2.4 percent to 5,906.00. Natural gas rose 0.6 per cent to $3.28 per 1,000 cubic feet.
In other metals trading, silver rose 2 percent to $14.61 an ounce and copper added 0.8 percent to $2.80 a pound.