The losses were widespread, and stocks that have been the biggest winners on the market the last few years, including technology companies and retailers, suffered steep declines.
All of those factors could threaten the impressive profits Corporate America has been reporting this year.
The S&P 500 shed 2.05% to below its 200-day moving average, extending its longest losing streak since the 2016 election.
It will take more than a daily stock market correction to stop the Fed from hiking, said George Goncalves, managing director and head of fixed income strategy at Nomura in NY. The broader financial sector was the second worst of the S&P's 11 sectors, with energy the worst. The Nasdaq composite, which has a large contingent of technology stocks, was 4.1 percent lower at 7,422.05.
Some early relief over a tame report on United States inflation gave way to renewed selling.
The tech-heavy TWSE index in Taiwan plummeted 6.3 percent, while Japan's Nikkei slid almost 4 percent and the South Korean KOSPI index dropped 4.4 percent as foreign investors pulled out.
Oil prices slumped to two-week lows as global stock markets fell, with investor sentiment made more bearish by an industry report showing US crude inventories rising more than expected.
Bond yields, which have spiked over the last week, slid after the Labor Department said consumer prices rose less than economists expected in September. Tencent has retreated 43 percent from its high this year and fallen out of the top 10 global companies by market value.
Tech stocks, hit hard Wednesday, crept back into positive territory Thursday morning.
The upcoming third-quarter earnings season has been seen as a potential antidote to the unease.
USA markets are coming off their steepest losses in eight months.
China was among the hardest hit overseas, with indexes in Shanghai and Hong Kong falling 5.2 and 3.5 percent, respectively.
In other metals trading, silver rose 2 percent and copper added 0.8 percent.
Asian markets tumbled on Thursday, after Wall Street slumped on a heavy selling of technology and internet stocks. Amazon, Apple, Alphabet and Facebook all fell by between 2.3pc and 3.9pc. Also known as Wall Street's "fear index", the VIX tends to rise when stocks are down.
Although the yield on the 10-year Treasury declined toward the end of the day, its jump from 3.05 percent early last week to more than 3.20 percent - a seven-year high - has spooked investors. The Nasdaq Composite was down 1.25%, briefly dipping into correction territory on the heels of its worst session since the Brexit referendum.
The Standard & Poor's 500 index fell 94 points, or 3.3%, to 2,785 on Wednesday, its biggest one-day loss since February 8. The benchmark S&P 500 dropped below its 200-day moving average price, while the Dow Jones Industrial Average slipped below its 100-day moving average.