The benchmark S&P 500 and the Dow Jones Industrial Average fell almost 1.5 percent and at the day's low had retreated 3.7 percent and 3.6 percent, respectively, from their all-time highs.
Alec Young, managing director of global markets research at FTSE Russell, said investors fear that rising interest rates and growing expenses are going to erode company profits next year.
All of those factors could threaten the impressive profits Corporate America has been reporting this year.
The Dow Jones Industrial Average lost 91 points, or 0.4 percent, to 25,506.
However, the technology sector began bouncing back on Thursday, despite the more than 500 point drop, gaining 0.46 percent. Amazon and Alphabet, respectively the second- and fourth-most valuable US companies, are in what's known as a "correction", a drop of more than 10 percent from a recent peak. Every one of the 11 S&P 500 sectors finished down for the day.
At 12:44 p.m., the Nikkei 225 average traded at 22,496.24, down 1,009.80 points, or 4.30 percent, from Wednesday's closing.
Some early relief over a tame report on U.S. inflation gave way to renewed selling.
The S&P 500 was down 3.29 percent, and the technology-heavy NASDAQ took the biggest hit, plunging more than four percent. Delta Air Lines shares rose 3.8 percent after the airline beat profit expectations.
Canadian stocks also fell on Thursday, weighed down by a more than 2-per-cent drop in healthcare and energy stocks amid a broad based sell-off in global equities.
"People fear building prices into the system, both from China trade problems, other tariffs the USA has put into place, wage pressure, and today there is a little bit of concern about what the Hurricane in Florida could do to energy prices".
After a long stretch of relative calm, the stock market has suffered sharp losses over the last week as bond yields surged.
Rising costs, as inflation and borrowing rates pick up, could also be a worry for stock markets. Stocks had come close to big drops in the last few days, but each time they recovered some of their losses.
Meanwhile struggling retailer Sears was in focus as the Wall Street Journal reported that it was preparing to file for bankruptcy.
The yield on the 10-year Treasury is 3.20%, the highest level in seven years. It was more than $40 five years ago. Amazon dropped another 2 percent to $1,719.36 and Apple fell 0.9 percent to $214.45. Over the years, Sears has closed hundreds of stores and sold several famous brands. The Japanese yen strengthened 0.53 percent versus the greenback at 112.36.
Oil prices fell to two-week lows after OPEC said its production rose in September, easing concerns about a drop-off in Iranian barrels as U.S. sanctions loom. The Nasdaq composite rose 15 points, or 0.2 percent, to 7,436.
Losses were fairly broad-based, with tech companies Amazon and Microsoft plummeting more than three percent, along with Boeing, Nike and Caterpillar. The British pound rose to $1.3197 from $1.3146.