US stocks posted their worst loss since February on Wednesday, the Dow Jones industrial average finishing the day down more than 800 points.
This time around, strong economic data anxious bond investors, who sent the benchmark yield on Tuesday to 3.261 percent, the highest since early May 2011.
Trade-sensitive industrial stocks also fell as tensions between Washington and Beijing persisted.
The biggest driver for the market over the past week has been interest rates, which began spurting higher following several encouraging reports on the economy. The S&P 500 shed 1.53% to 2,839.43, on track for its steepest loss since June.
Gina Martin Adams, the chief equity strategist for Bloomberg Intelligence, said investors are concerned about the big increase in yields, which makes it more expensive to borrow money. The energy sector was close behind with a 2.9 percent loss, as oil extraction in the Gulf of Mexico shutting down due to the hurricane.
All of these stocks have seen sharp gains on the year and yet investors have been quick to sell-off and take profits as they shift into more conservative securities like bonds and treasury notes.
Tech leaders Amazon (AMZN), Facebook (FB) and Netflix (NFLX) all helped lead the market lower Wednesday while stodgier companies like food companies Smucker (SJM) and General Mills (GIS), gold miner Newmont (NEM) and bargain retailers Dollar General (DG) and Dollar Tree (DLTR) finished the day higher.
Earlier on Thursday, the SPI200 futures contract was down 109 points, or 1.81 per cent, to 5,914.0 at 7am AEDT, pointing to bleak open for the ASX, which had clawed back some ground on Wednesday after a turnaround in financial stocks and a strong performance by the healthcare sector.
Many investors now believe that the Federal Reserve's campaign to "normalize" monetary policy, reversing years of extraordinary support that included the quantitative easing bond buying program and keeping its overnight target very low, will push interest rates higher than previously thought.
US crude settled down $1.79 at $73.17 per barrel and Brent fell $1.91 to settle at $83.09. Silver dipped 0.5 percent to $14.33 an ounce. Alphabet has dropped 15 percent since late July. The Nasdaq fell 177 points, or 2.3 percent, to 7,560. And tech stocks got hit particularly hard. Investors see many of these countries as being vulnerable to higher United States interest rates, which can pull away investment dollars.
Japan's Nikkei 225 added 0.2 per cent, South Korea's Kospi dropped 1.1 per cent and the Hang Seng in Hong Kong gained 0.1 per cent. Brazil's Bovespa lost 2.5 percent and the Merval in Argentina sank 2.2 percent. The British pound rose to $1.3197 from $1.3146.
CURRENCIES: The dollar held steady at 113.05 Japanese yen.