The Dow Jones fell by more than 700 points on Wednesday as the bond market flashes a recession warning.
The Dow has since rebounded slightly, edging up to 611 at 13.28 EDT.
Other US stocks also experienced a downward turn, plummeting between two and three percent by early Wednesday afternoon with the NASDAQ down over 200 points, and the S&P 500 dropping over eighty points.
The tumble comes after the yield on the 10-year Treasury bond briefly fell below the two-year Treasury's yield Wednesday morning for the first time since 2007, prompting investors to dump stocks amid fears of a possible recession ahead.
Markets have experienced volatility this month against a background of mounting tensions in trade relations between the United States and China.
The plunge in stocks comes a day after a brief spike as President Trump announced he will be delaying the introduction of tariffs on some Chinese goods to avoid hurting US shoppers before the Christmas holidays.
Previously, Trump said that an additional 10 percent tariff on $300 billion worth of Chinese goods would take effect starting from September 1.
Moreover, the United States designated China as a currency manipulator after the Chinese central bank allowed the yuan to fall below a key threshold.
The United States and China have been involved in a trade war since June 2018, when Trump stated he was imposing tariffs on $50 billion worth of Chinese imports in a bid to balance the trade deficit. Since then, the two countries have introduced several rounds of reciprocal tariffs.