Global stocks fell sharply Thursday as investors sold off shares and looked for safety in gold and bond markets.
In New York, the Dow fell 1.6 percent at the close, the S&P 500 dropped more than 1.2 percent while the NASDAQ slid 0.1 percent.
Analysts said the losses were fueled by further drops in oil prices, a slide in bank shares and a slowing global economy. Adding to investor worries was the cautious tone taken this week by U.S. central bank chief Janet Yellen, who told lawmakers on Capitol Hill that a weakened global economy and the continued volatility in financial markets could hurt U.S. economic growth.
Yellen said it was unlikely the Fed would cut its benchmark interest rates from the current level, but hinted at a slower pace of rate hikes this year.
Federal Reserve Board Chair Janet Yellen prepares to testify on Capitol Hill in Washington, Feb. 10, 2016, before the House Financial Services Committee hearing on monetary policy and the state of the economy.
Earlier, Britain's FTSE declined 2.4 percent, Germany's DAX fell 2.9 percent, and France's CAC lost 4 percent.
Hong Kong's Hang Seng plunged nearly 4 percent while South Korea's Kospi fell 2.9 percent, it's biggest single-day drop in nearly four years.
Analysts expect the volatility will continue. Market strategist Oliver Roth at Oddo Seydler Bank said the financial sector is one major worry.
"The banks are under pressure, especially the banking sector, so what we see is a huge pressure on the market,” Roth said. “Investors are very nervous, especially about the banking sector, but also of course about the oil price, the low oil price and so on. So we have altogether a very negative scenario right now, and the market is very nervous."
VOA's Mil Arcega contributed to this report.