Surprisingly weak US employment data on Friday stoked fears of a recession ahead, prompting investors to dump stocks and turn to safe-haven bonds, Reuters reported.
Treasury prices surged, sending yields to multi-month lows.
Oil price benchmarks fell by more than $3 per barrel at their session lows. The US dollar index dropped over 1% to its weakest since March.
Richly valued technology firms bore much of the pain, and an index of European bank stocks headed for its largest weekly decline in 17 months on soft earnings.
The VIX stock market volatility measure, dubbed Wall Street's fear gauge, surged over 40%.
Friday's US jobs report showed job growth slowed more than expected in July and unemployment increased to 4.3%, pointing to possible weakness in the labor market and greater vulnerability to recession.
Markets were already rattled by downbeat earnings updates from Amazon and Intel and Thursday's softer-than-expected US factory activity survey in addition to the monthly US non-farm payrolls report, which showed job growth slumped to 114,000 new hires in July from 179,000 in June.
The data raised expectations of multiple rate cuts by the Federal Reserve this year, which just this week opted to keep rates unchanged, Reuters reported.
"The jobs data are signaling substantial further progress that the Federal Reserve made a policy error by not reducing the fed funds rate this week," said Jamie Cox, managing partner for Harris Financial Group in Richmond, Virginia.
"It’s very possible the Fed alters its inter-meeting communications on the balance of risks to remove all doubt about a September rate cut."
With thin summer trading likely exaggerating moves, a slump that began in Asia with a 5.8% drop for Japan's Nikkei, its biggest daily fall since March 2020 during the COVID-19 crisis, rippled through Europe and headed for Wall Street.
MSCI's gauge of stocks across the globe fell 16.09 points, or 2.00%, to 787.31.
The Nasdaq Composite lost 417.98 points, or 2.43%, to 16,776.16. The index has fallen more than 10% from its July closing high, confirming it is in a correction after concerns grew about expensive valuations in a weakening economy.
The Dow Jones Industrial Average fell 610.71 points, or 1.51%, to 39,737.26, the S&P 500 lost 100.12 points.
Europe's STOXX 600 fell close to 3%, with financials and technology the worst hit.
Emerging market stocks fell 24.30 points, or 2.23%, to 1,063.50.
MSCI's broadest index of Asia-Pacific shares outside Japan closed 2.48% lower 2.48%, at 553.72, while Japan's Nikkei fell 2,216.63 points, or 5.81%, to 35,909.70.
The Fed has kept benchmark borrowing costs at a 23-year high of 5.25%-5.50% for a year, and some analysts believe the world's most influential central bank may have kept monetary policy tight for too long, risking a recession.
Money markets on Friday rushed to price a 70% chance of the Fed, which was already widely expected to cut rates from September, implementing a jumbo 50 basis points cut next month to insure against a downturn.
The "employment report flashes a warning signal that this economy does have the ability to turn rather quickly," said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management in Minneapolis.
"Ultimately, today’s employment data should embolden the committee to cut policy by more than 25 basis points at the next meeting."
RUSH AWAY FROM TECH, TO SAFE HAVENS
Shares in US chipmaker Intel tumbled to a more than 11-year low and finished down over 26%, after suspending its dividend and announcing hefty job cuts alongside underwhelming earnings forecasts.
Artificial intelligence chipmaker Nvidia, one of the biggest contributors to the tech rally, dropped 1.8%
Up more than 700% since January 2023, Nvidia has left many asset managers with an outsized exposure to the fortunes of this single stock.
Safe-haven buying went full throttle, with government debt, gold and currencies traditionally all rallying. They are assets viewed as likely to hold value during market chaos.
The yield on benchmark US 10-year notes fell 18 basis points to 3.798%.
The 2-year note yield, which typically moves in step with interest rate expectations, fell 28.5 basis points to 3.8798%.
In foreign exchange markets, the yen added nearly 2%, extending a rapid bounceback after the Bank of Japan raised interest rates to levels unseen in 15 years.
In commodities, spot gold lost 0.37% to $2,436.31 an ounce and US gold futures settled 0.4% lower to $2,4769.8.
Oil prices took a hit on the growth worries, with global benchmark Brent futures settled down $2.71, or 3.41%, to $76.81 a barrel. US West Texas Intermediate crude futures finished down $2.79, or 3.66%, at $73.52.
