New worries over a eurozone meltdown sent US stocks plummeting more than three percent on Wednesday.
US markets followed their European counterparts sharply lower amid fears over the strength of the 17-member eurozone after Italian debt yields jumped as high as 7.4 percent, the level at which other troubled eurozone countries sought rescues.
The Dow Jones Industrial Average plunged 389.24 points (3.20 percent) to close at 11,780.94.
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The broad-based S&P 500 lost 46.82 (3.67 percent) to 1,229.10, while the tech-heavy Nasdaq Composite tumbled 105.84 points (3.88 percent) to 2,621.65.
"After digesting Italian Prime Minister Silvio Berlusconi's vow to resign, it seems investors are now questioning the debt-strapped country's political and financial trajectory -- and, more importantly, what that could mean for the eurozone," said Andrea Kramer of Schaeffer's Investment Research.
The markets fall hit all sectors, with all 30 Dow blue chips losing ground.
Banks feared to have risky European exposure were hit the hardest: Goldman Sachs sank 8.2 percent, Citigroup fell 8.2 percent, Morgan Stanley 9.0 percent and JPMorgan Chase 7.1 percent.
General Motors shares slid 10.9 percent after it reported a 5.9 percent fall in third quarter income and forecast a flat fourth quarter, in part due to the turmoil in the eurozone.
Yahoo! shares meanwhile jumped 3.3 percent at mid-session on reports that Softbank and Alibaba had approached private equity groups about making a hostile bid for the whole company.
But in the absence of any confirmation or denial, Yahoo! gave up the gains closed off 0.3 percent at $15.92.
Shares in Adobe lost 7.7 percent after the software company cut its fourth quarter forecast and said it was pulling the plug on its Flash player for mobile browsers, which Apple's late chief Steve Jobs refused to allow on the iPhone and iPad.
The company also said it would lay off 750 US and Europe staff.
US bond prices jumped as buyers fled eurozone paper. The yield on the 10-year Treasury dropped to 1.96 percent from 2.07 percent Tuesday, while that on the 30-year Treasury moved to 3.02 percent from 3.12 percent.
Bond yields and prices move in opposite directions.
