Wall Street's main indexes have all tumbled to close well down as rattled investors continued to reposition themselves amid fears the US Federal Reserve's hawkish rate policy will help tip the country's economy into recession.
The Dow narrowly avoided ending more than 20 per cent lower than its January 4 record all-time closing peak of 36,799.64 points, meaning the blue-chip index did not attain a bear market label, according to a widely used definition.
The S&P 500 and the Nasdaq are already in a bear market.
After enjoying hefty gains for last two years, Wall Street has been rocked in 2022 by worries about a host of issues including the Ukraine conflict, the energy crisis in Europe, China's COVID-19 flare ups and tightening financial conditions across the globe.
A half dozen central banks including in the United States, United Kingdom, Sweden, Switzerland and Norway delivered rate hikes this week to fight inflation but it was the Fed's signal that it expects high US rates to last through 2023 that caught markets off guard.
"There had been some optimists out there saying that inflation may be coming under control but the Fed effectively told them to sit down and shut up," said David Russell, VP of market intelligence at TradeStation Group.
"The Fed is trying to rip the band-aid off, trying to kill inflation while the jobs market is still strong."
Dire outlooks from a handful of companies have also added to woes in a seasonally weak period for markets.
Having withdrawn its earnings forecast last week, FedEx Corp outlined on Thursday cost cuts of up to $US2.7 billion ($A4.1 billion) after falling demand hammered first-quarter profits.
The delivery giant's stock slumped in Friday trading.
The S&P 500's estimated earnings growth for the third quarter is at 4.6 per cent down from 5.0 per cent last week, according to Refinitiv data.
Goldman Sachs cut its year-end target for the benchmark S&P 500 index by about 16 per cent to 3,600 points.
"We're having everyone reassess exactly how far the Fed will go, and that's troubling for the economy," said Ed Moya, senior market analyst at OANDA.
"It's becoming the base case scenario that this economy is going to have a hard landing, and that is a terrible environment for US stocks."
The S&P 500 lost 62.49 points, or 1.69 per cent, to end at 3,694.32 points, while the Nasdaq Composite lost 193.70 points, or 1.75 per cent, to 10,873.10 and the Dow Jones Industrial Average fell 473.55 points, or 1.57 per cent, to 29,603.13.
All three indexes also recorded sharp weekly losses.
All the 11 major S&P sectors declined, led by a slide in energy shares.
Oil and gas-related stocks were pummelled by the decline in crude prices, which fell in response to concerns about demand in a recessionary environment and the strong US dollar.
Oilfield services were particularly hit, with Halliburton Co, Schlumberger and Helmerich and Payne Inc slumping.
Rate-sensitive technology and growth stocks dropped with Alphabet Inc, Apple Inc, Amazon.com, Microsoft Corp and Tesla Inc all falling.
Shares of Costco Wholesale Corp dropped after the big-box retailer reported a fall in its fourth-quarter profit margins.
The CBOE volatility index, also known as Wall Street's fear gauge, rose to a three-month high.