That all played into a market that is increasingly anxious about global growth after warnings from the International Monetary Fund this week and a rise in Treasury yields to a more than 7-year high above 3 percent that signals a tightening of available capital globally.
Technology shares tumbled on fears of slowing demand, while bond yields ended lower after seeing multi-year highs earlier this week.
"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.
"The fundamental environment, though, remains supportive of share appreciation".
"The direct concern is higher interest rates", said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
"Specifically, I do not anticipate much more of an increase in longer dated Treasury yields".
In other metals trading, silver rose 2 percent to $14.61 an ounce and copper added 0.8 percent to $2.80 a pound.More news: Bulgarian TV journalist murdered in EU's third killing in a year
The Dow Jones Industrial Average fell 198.28 points, or 0.77 per cent, to 25,400.46. "That suggests the Fed will keep raising rates, and that's taking the wind out of the stocks that have done the most, particularly in the tech sector". That will raise the cost of corporate borrowing and could drag on economic growth. Brent crude, the worldwide standard, dropped $1.58 to $81.51 a barrel.
Three of the biggest American banks-JPMorgan Chase, Citigroup, and Wells Fargo-will report their third-quarter results Friday. Amazon dropped another 2 percent to $1,719.36 and Apple fell 0.9 percent to $214.45.
Every S&P 500 sector fell heavily, with big-name technology stocks like Facebook and Apple among the biggest drags on the United States market.
China was among the hardest hit overseas, with indexes in Shanghai and Hong Kong falling 5.2 and 3.5 percent, respectively. Brazil's Bovespa lost 2.5 per cent and the Merval in Argentina sank 2.2 per cent. Microsoft and Alphabet, Google's parent company, were little changed. Amazon skidded 4.8 per cent to $1,781.21 (U.S.). After years of big gains, those stocks are now out of favor.
The Nasdaq composite has fallen 9.6 percent since it set a record high in late August and the Russell 2000 has fallen 11 percent.
U.S. crude settled down $1.79 at $73.17 per barrel and Brent fell $1.91 to settle at $83.09. Australia's S&P/ASX 200 slipped 2.4 percent to 5,906.00. U.S. gold futures settled up $1.9, or 0.16 percent, at $1,193.4.
The communication services sector also rose 0.49 percent on Thursday, with Facebook and Alphabet both rising 1.4 percent.
The dollar fell to 111.98 yen from 112.59 yen, and the euro rose to $1.1593 from $1.1525.