Technology stocks, the biggest winners in the market over the past year, took some of the worst losses. Every one of the 11 S&P 500 sectors finished down for the day.
The Nasdaq composite, which has a high concentration of technology companies, had its biggest loss in more than two years.
Fears over the worldwide trade war, the impact of Hurricane Michael, the upcoming USA midterm elections and a potentially disappointing Q3 earnings season likely all played a role in Wednesday's weak market.
The weakness in tech was led by semiconductor names after Swiss vacuum valve maker VAT Group said demand from chip equipment makers was softening.
Wednesday's 2.4-percent drop in the SPDR S&P 500 ETF (NYSE: SPY) comes after the S&P 500 gained 22.2 percent in the previous 18 months.
The S&P 500 index hasn't suffered a five-day losing streak since November 2016, just before the United States presidential election.
Shares in Facebook, Amazon, Apple, Netflix and Google's parent company Alphabet - the so-called "Faang" stocks that have driven United States markets to all-time highs recently - all fell in NY trading.
"It's primarily the cumulative effect of interest rate moves over the past five days and news reports about trade impacting companies".
The Dow Jones Industrial Average and the S&P 500 fell 3.2% and 3.3%, respectively.
The small-cap Russell 2000 index, which is less sensitive than its larger peers to global worries such as trade and yields, was down 1.18 percent. That didn't happen Wednesday as stocks fell further late in the day.
In technology, Microsoft dropped 3.1 per cent to US$108.76 Wednesday and Nvidia lost 4.7 per cent to US$253.13. Technology stocks fell especially sharply.
Insurance companies dropped as Hurricane Michael continued to gather strength and came ashore in Florida bringing winds of up to 155 miles per hour. Berkshire Hathaway dipped 4.1 per cent to $214.64 and reinsurer Everest Re slid 4.6 per cent to $218.97. Tiffany plunged 10.2 percent to $110.38 and Ralph Lauren fell 8.4 percent to $116.96.
The U.S. stock market had its worst day since February, with major indices all plunging on rising interest rates and anxiety about tech investments, trade wars and the cost of Hurricane Michael. Higher rates can slow economic growth, erode corporate profits and make investors less willing to pay high prices for stocks.
United States long-dated Treasury yields rose again in extension of a trend during the past few weeks fuelled by solid U.S. economic data that reinforced expectations of multiple interest rate hikes in the next 12 months. Think of it this way, if the Treasury issues a $1000 bond paying 3 percent interest, investors will not pay $1000 for an older bond paying 2 percent interest.
Wall Street stocks plunged Wednesday, with major indices losing more than three percent in a selloff prompted by the sudden jump in US interest rates.
"It's a risk-off environment as investors are focusing on spiking yields and taking profits off the table as they are concerned about whether the bull market is actually coming to an end", said Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada.