But Wall Street shares pared some of its losses and fell less than many other global stock markets in early trade.
The Dow Jones Industrial Average fell 365.42 points (4.20 percent) to 8,325.83 in the first 20 minutes of trade, moving up slightly from steeper opening losses.
The Nasdaq saw a dive of 70.70 points (4.41 percent) to 1,533.21 and the Standard & Poor's 500 index sank 44.74 points (4.93 percent) to 863.37.
The market action came amid a wave of panic in markets around the world as mounting evidence signaled that major economies are heading for recession from a credit crunch and banking crisis.
"We have now reached a point where fundamentals and long-term valuation considerations do not matter any more for financial markets," said economist Nouriel Roubini at New York University.
London stocks plunged more than nine percent to a five-year low, Frankfurt crashed by 10.13 percent and Paris tumbled by more than seven percent approaching the half-way stage of trade.