The Standard & Poor's 500 suffered its biggest drop since late September as the European Central Bank disappointed market hopes for greater stimulus.
European stocks sank, logging their worst session in more than three months as ECB plans for additional fiscal stimulus fell short of market expectations.
Craigs Investment Partners broker Chris Timms said the sell-off came as ECB president Mario Draghi announced the bank would extend its programme of monthly bond purchases through to March 2017 and left the door open for an extension.
There had been expectations bond purchases would be extended beyond September 2016, he said.
The ECB left the amount of asset purchases unchanged at 60 billion ($NZ98.3 billion) a month.
The ECB buys mainly euro-denominated government bonds.
The ECB move caused a spike in the euro, catching investors by surprise and forcing them to shift positions in most asset classes.
Bond prices dropped after the announcement.
At the same time, the CBOE Volatility index, the stock market's fear gauge, jumped 13.8%, closing at its highest since November 17.
The ECB overnight deposit rate was cut from -0.2% to -0.3% to push banks to lend instead of parking money at the ECB, Mr Timms said.
The cut in the rate on overnight bank deposits meant banks paid more to the ECB for holding their reserves.
''The policy is designed to make it more profitable for banks to offer loans to consumers and businesses, ensuring a free flow of money.
However, most analysts had been expecting the ECB to take more drastic action.''
Inflation across the euro zone was still stubbornly low, standing at just 0.1% in November, far below the ECB's target of just under 2%, he said.
