Investors may want to shift out of momentum and into more defensive stocks - companies that aren't as expensive and also pay healthy, stable dividends.
Although the losses were widespread, stocks that have been the biggest winners on the market, including technology companies and retailers, suffered steep declines. In 1956, the Fed raised interest rates, while worldwide events like the Suez Crisis and the Hungarian Revolution caused investors to pull back. Higher rates increase borrowing costs, pinching corporate profits.
Stocks are in the midst of a scary October slump, sliding sharply because investors are anxious about rising interest rates. "Suddenly, the market's assumption that the USA corporate sector is an island of stability is coming under greater scrutiny".
The previous bear market, from October 2002 to October 2007, collapsed in the face of the global financial crisis, precipitated by raising interest rates in the face of inflation that revealed the vast scale of subprime mortgages and other badly collateralized loans. "I think the Fed has gone insane", he charged.
"Equity markets were pulverized today as investors remain in full out retreat and even the most pessimistic of equity bears are still in shock by the sheer magnitude of the move", he added.
Benchmark U.S. crude oil fell 2.4 per cent to $73.17 a barrel in NY.
"It is a flawless storm for technology right now with the tariff war with China and weaker demand for chips", Nauman said.
Apple gave up 4.6 percent to $216.36 and Microsoft dropped 5.4 percent to $106.16. The yield on the 10-year Treasury fell to 3.16 percent. Australia's S&P/ASX 200 slipped 2.4 percent to 5,906.00. The stock fell 15 per cent to 50 cents.
Innes, the Singapore-based head of Head of Trading for Asia Pacific with OANDA, attributed the slide to a combination of factors, including the possibility further interest rate hikes and the battle over tariffs between the USA and China.
New York's Dow Jones Industrial Average fell 3%, or more than 800 points, in Wednesday trading. The Dow fell 832 points, or down 3.15 percent. USA gold futures settled up $1.9, or 0.16 percent, at $1,193.4.
Shares in upscale jewellery retailer Tiffany & Co and perfume maker Estee Lauder both fell 7 percent after a warning from French luxury goods firm LVMH about softening demand in China. The Russell 2000 dropped 25 points, or 1.6 percent, to 1,550.25.
Shares in Facebook, Amazon, Apple, Netflix and Google's parent company Alphabet - the so-called "FAANG" stocks that have driven United States markets to all-time highs recently - all fell in NY trading.
The two-year yield soared to its highest mark since 2008.
Francis Tan, an investment strategist at UOB private bank, believes the markets will likely pick up in the US session. Before that, Bitcoin was showing stability in value as per the general crypto volatility standards around the same time stock market indexes were trending sideways. The Japanese yen strengthened 0.53 percent versus the greenback at 112.36. The euro rose to $1.1525 from $1.1496. Brent crude, the worldwide standard, lost 2.2 per cent to $83.09 a barrel in London. Brent crude, the global standard, dropped $1.58 to $81.51 a barrel.