World stocks were set to snap a record 15-month long winning streak on Wednesday, tumbling another quarter percent after new Fed boss Jerome Powell's comments suggested the possibility of four U.S. interest rate rises this year rather than three.
Barely recovered after an early-February sell-off, equity sentiment has been shaken by Powell and by data showing China's manufacturing sector slowing to its weakest in over 1-1/2 years and Japanese industrial output down the most since March 2011.
The U.S. Federal Reserve chief, in his debut testimony to Congress on Wednesday, struck a mildly hawkish note, noting inflation had risen since December and vowing to prevent the economy from overheating.
That was enough for traders to add bets on the Fed squeezing in another rate rise this year, with futures tied to target policy rates now pricing a one-in-three chance of a fourth hike.
With U.S. 10-year yields again approaching recent four-year highs, New York shares closed 1 percent lower on Tuesday. MSCI's all-country index fell 0.8 percent on Tuesday and tumbled another 0.3 percent on Wednesday.
Wall Street's main volatility gauge, the VIX, opened a touch lower, after seeing its biggest daily rise since early-February.
But a fall in new orders for U.S.-made capital goods for the second month in a row, plus the dismal Chinese and Japanese numbers, have made investors fret about a possible setback to growth, especially in China, the world's No. 2 economy.
"(Powell's) more hawkish tone and disappointing durable goods data explains the sell-off in stocks. China PMI data was also a bit disappointing overnight," said Benjamin Schroeder, a strategist at ING Bank.