Wall Street main indexes slumped more than 2.5 percent on Wednesday, as a closely watched US bond market indicator pointed to a renewed risk of recession following poor economic data from Germany and China.
The S&P 500 index has now sunk 4.5 percent since President Donald Trump announced a fresh round of tariffs on Chinese imports at the start of August and is on course for its worst three-week percentage slide this year.
The interest-rate sensitive bank subsector plunged 4.3%, while the broader financial sector fell 3.5%, putting them on course for their biggest one-day percentage fall this year.
"The bond market is the one that seems to be leading, the stock market is just kind of following at this point. That tells you we are in a headline market where investors will react quickly to what the flavor of the day is," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
The CBOE Volatility index, also known as Wall Street's "fear gauge", rose 5.2 points to 22.71.
Eight of the 11 major S&P sectors shed more than 2%. Only the defensive utilities sector was higher, while consumer staples and real estates posted the smallest losses.
At 13:04 p.m. ET, the Dow Jones Industrial Average was down 709.51 points, or 2.70%, at 25,570.40, the S&P 500 was down 79.36 points, or 2.71%, at 2,846.96. The Nasdaq Composite was down 239.60 points, or 2.99%, at 7,776.76.
The energy sector shed 3.9% as oil prices slumped on demand worries.
Shares of Apple Inc were down 2.7% after boosting markets a day earlier with a 4% rise. Chipmakers were also down, with the Philadelphia chip index slumping 3.4%.
The biggest decliner on the S&P 500 index was Macy's Inc, down 14.6%, after the department store operator cut its full-year profit forecast as it discounted heavily to clear excess spring season inventory.
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