Thursday's drop comes against the background of rising COVID-19 cases in the United States, with 145,000 infections reported on Wednesday, the most recent record high.
The Dow is up 756.77 points, or 2.7%.
Consequently, the Dow Jones Industrial Average lost 358.48 points, or 1.22%, to 29,039.15, the S&P 500 fell 38.94 points, or 1.09%, to 3,533.72 and the Nasdaq composite dropped 84.98 points, or 0.72%, to 11,701.45.
Aside from that, the airlines and cruise operators, which had borne the heaviest brunt in the pandemic outbreak, had been the major drag on benchmark S&P 500 with Royal Caribbean Cruises Ltd. and Carnival Corp. curbing out 2.4 per cent and 6.2 per cent respectively.
NY became the latest state to introduce social distancing restrictions on Wednesday, as new coronavirus cases in the United States surged above 100,000 for an eighth consecutive day.
Additionally, while new data showed that United States jobless claims fell to a seven-month low last week, the pace of job recovery has slowed.
The Nasdaq closed up 2% on Wednesday as investors switched back to technology stocks and away from economically sensitive sectors as they weighed Covid-19 vaccine progress against a virus surge and likely timing for a economic rebound.
The U.S. Labor Department is slated to release jobless claims data for last week before the opening bell, and economists surveyed by Dow Jones expect 740,000 claims.
"It's the classic between the market discounting something that is nine to 12 months out, and then "undiscounting" it because it has not happened yet".
Among the biggest boosts to the Nasdaq was a surge 20% in the US -listed shares of Chinese e-commerce company Pinduoduo Inc after it reported strong quarterly revenue.
The Nasdaq is down 185.64 points, or 1.6%.
The pan-European STOXX 600 index rose 0.01% and MSCI's gauge of stocks across the globe gained 0.83%.
The S&P 500 posted five new 52-week highs and no new lows; the Nasdaq Composite recorded 66 new highs and 11 new lows.
On US exchanges 9.65 billion shares changed hands, in a sharp volume decline from Monday and Tuesday but not far below the 9.94 billion average for the last 20 sessions.
Overseas, in Japan, the Nikkei 225 index gained 0.7%, while in Hong Kong, the Hang Seng index faded 0.2%. The biggest sector decliners were materials, down 1.4% followed by industrials and energy, both finishing down more than 0.8%. Treasury prices and yields move in opposite directions.
US crude fell 0.8% to settle at $41.12 per barrel, while Brent settled at $43.53 per barrel, down 0.6% on the day.