Markets are still rattled and they appear headed for a second day of significant losses.
Although the losses were widespread, stocks that have been the biggest winners on the market, including technology companies and retailers, suffered steep declines.
Apple gave up 4.6 percent to $216.36 and Microsoft dropped 5.4 percent to $106.16.
Adding to the worries was the impact of Hurricane Michael on insurance companies as well as fears about demand in China which weighed on luxury brands such as Tiffany - down 10% - as well as Ralph Lauren, which was off 8%. Many stock-market observers pin the start of the current bull market, the longest since World War II, at March 9, 2009.
Higher bond rates can weigh on stocks as they provide more competition for yield-hungry investors.
Many investors now believe that the Federal Reserve's campaign to "normalize" monetary policy, reversing years of extraordinary support that included the quantitative easing bond buying program and keeping its overnight target very low, will push interest rates higher than previously thought.
The sharp decline in stocks was led by a fall in shares across several of the world's largest technology giants. "Semiconductors have the most exposure to China out of segments in the S&P 500". The yield on the 10-year Treasury fell to 3.16 percent.
The Dow Jones Industrial Average fell 198.28 points, or 0.77 per cent, to 25,400.46.
"People fear building prices into the system, both from China trade problems, other tariffs the USA has put into place, wage pressure, and today there is a little bit of concern about what the Hurricane in Florida could do to energy prices".
Trump says missing Saudi journalist no reason to stop investments there
Riyadh insisted the Khashoggi left the building and called the murder claims "baseless". CCTV footage shows him entering the consulate but never leaving it.
Virgin to be in space 'within weeks'
The 67-year-old multi-millionaire was initially expected to take part in a space flight before April this year. Blue Origin , owned by Amazon founder Jeff Bezos , has said it aims for test flights by the end of 2018.
Photo surfaces of doomed reporter walking into Saudi Consulate
Less than a day after saying he was "concerned" for Khashoggi, Trump said he would talk with Saudi officials "at some point ". The Saudi government has denied the allegation. "We have jobs, we have a lot of things happening in this country".
US crude settled down $1.79 at $73.17 per barrel and Brent fell $1.91 to settle at $83.09.
Wholesale gasoline shed 2.7 per cent to $2.02 a gallon.
The communication services sector also rose 0.49 percent on Thursday, with Facebook and Alphabet both rising 1.4 percent.
USA gold futures settled up $1.9, or 0.16 percent, at $1,193.4. Silver dipped 0.5 per cent to $14.33 an ounce. Heating oil fell 1.2 per cent to $2.39 a gallon.
Among the tech sector's worst performers in Europe, Austrian chipmaker AMS fell 5.9 percent and STMicroelectronics closed down 5.8 percent.
Globally, France's CAC 40 dropped 1 per cent and the DAX in Germany lost 0.6 per cent. Britain's FTSE 100 sank 1.3 per cent.
In further evidence that stocks can rally despite rising Treasury yields, LPL Research found that in all 12 periods of rising 10-year yields since 1996, the S&P 500 ended the period higher than it began, according to senior market strategist Ryan Detrick. The British pound rose to $1.3197 from $1.3146.