Stocks on major world markets slid to a three-month low on Wednesday, with the benchmark S&P500 stock index falling more than 3.0 percent, its biggest one-day fall since February.
Technology shares tumbled on fears of slowing demand, while bond yields ended lower after seeing multi-year highs earlier this week.
Major equity indexes in Europe fell more than 1.0 percent, also pulled down by technology shares, and gold prices inched up as some investors sought refuge in the metal.
“The S&P 500 is looking very weak and negative and that is putting fear into investors,” said Michael Matousek, head trader at U.S. Global Investors. “With the markets going down people are increasing their allocation towards gold.”
On Wall Street, the Philadelphia Semiconductor index tumbled 4.46 percent after Swiss vacuum valve maker VAT Group said demand was softening from chip equipment makers.
Among the tech sector’s worst performers in Europe, Austrian chipmaker AMS fell 5.9 percent and STMicroelectronics closed down 5.8 percent.
Benchmark U.S. 10-year Treasury notes rose late in the day, pushing yields down to 3.1931 percent. Yields on 3-year notes have recently traded just above 3.0 percent, providing long-absent competition for investment returns with equities.
The rise in U.S. Treasury yields has been bolstered by good U.S. economic data that has reinforced expectations of multiple rate hikes over the next 12 months by the Federal Reserve.
Stocks and bonds traditionally have been in a tug of war for capital, but for the past 10 years bonds have had one arm tied behind their back, said Jack Ablin, chief investment officer and founding partner at Cresset Wealth Advisors in Chicago.
“Short-term bonds are getting to be a compelling place to hang out,” he said. “This orphan status that equity markets have enjoyed for the last 10 years is disappearing and finally getting some competition from the bond market.”
The Dow Jones Industrial Average fell 831.83 points, or 2.2 percent, to 25,598.74. The S&P 500 lost 94.66 points, or 3.29 percent, to 2,785.68 and the Nasdaq Composite dropped 315.97 points, or 4.08 percent, to 7,422.05.