Among the reasons for selling on Thursday, according to investors, were worries about the U.S.-China trade war, rising interest rates and lingering worries about possible overvalued U.S. tech stocks. Stocks also fell as Treasury Secretary Steven Mnuchin pulled out of a Saudi Arabia investment conference as traders worried a large global investor in the kingdom is coming under greater scrutiny.
Several stocks seen as economic bellwethers fell sharply in the U.S., including United Rentals and Textron, which dropped at least 11 percent each. Snap-on and Caterpillar, meanwhile, fell 9.6 percent and 3.9 percent, respectively. Large-cap tech shares like Facebook and Amazon both fell more than 2.5 percent, along with Alphabet and Netflix.
The Shanghai Composite dropped 2.9 percent and hit its lowest level since November 2014.
"Mr. Market is speaking loud and clear on China. The country is losing and needs to cry uncle," Nick Raich, CEO of The Earnings Scout, said in a note to clients.
"Chinese stocks are now at a four year low as rising U.S. interest rates and the likelihood of less favorable trade deals is going to adversely impact Chinese companies profits next year and its market price is re-setting lower to reflect that," Raich said.
This drop in Chinese stocks increased fears that China's economy, the world''s second largest, could be slowing down, dragging down global growth. These worries increased Thursday after European Central Bank President Mario Draghi said one of the risks for the economy was countries trying to circumvent EU budget rules.
Draghi's comments sent Italian bond yields to their highs of the day and sent major European stock-market indexes to their session lows.