The retreat on Wall Street was led by technology stocks, which dropped 2.55 per cent, and the trade-sensitive industrial stocks that fell 2 per cent.
The increase in yields from these bonds - which are parcels of USA government debt - can hurt stocks since they will provide competition for investors' cash.
At the closing bell in the New York Stock Exchange on Wednesday, the Dow Jones Industrial Average had lost 3.1 percent or 830 points to finish at 25,613.35, in the biggest fall in eight months.
Bascand said outside the U.S. data was not so strong indicating global growth was no longer synchronised and stronger United States data was not necessarily a good thing for all as it meant higher interest rates.
There is some concern among investors that the Fed could overreact to the strong economy - it grew at a robust annual rate of 4.2 per cent in the second quarter - and ramp up rate hikes and prematurely put the brakes on growth. "This is a bull market correction".
The Nasdaq composite fell 73 points, or 1 per cent, to 7,663.
"The New Zealand market has been declining from its highs for the last few weeks".
"Volumes are surging because people are sitting up and acting", he said. Chipmaker Nvidia dropped 5 per cent.
The 10-year Treasury yield remained at 3.20 percent, about where it was late Tuesday, after earlier touching 3.24 percent. The rise in rates is weighing particularly heavily on areas of the market that had earlier been the biggest winners. It's fallen 6.3 per cent over the last five days.
The small-cap Russell 2000 index, less sensitive than its larger peers to global worries such as trade and yields, was down 1 per cent at 1,605.60 points, below its 200-day moving average.More news: Call of Duty: Black Ops 4 File Size Revealed
The ASX200 was below the 6000-point mark for the first time since early June, while the broader all ordinaries is down 116.9 points, or 1.9 per cent, at 6046.9.
Which stocks are taking the big hits?"Semiconductors have the most exposure to China out of segments in the S&P 500".
The Aussie is buying 70.73 USA cents, up from 70.13 United States cents at Wednesday's close. The stock fell 16.8 percent to 49 cents.
Elsewhere, insurance companies dropped as Hurricane Michael continued to gather strength and came ashore in Florida bringing winds of up to 155 miles an hour. Berkshire Hathaway fell 3.8 per cent to US$215.20. Boeing lost 4 per cent to $370.04 and Alphabet, Google's parent company, gave up 3.2 per cent to $1,109.08.
CNN reported today that investors may want to start shifting into more defensive stocks, which aren't as expensive as the tech players and also pay healthy, stable dividends.
"Specifically, I do not anticipate much more of an increase in longer dated Treasury yields".
In a single word: yields.
"If investors are going to take profits then it will be from some of the bigger, high-growth names", Nauman said.
All three indexes hit records between August 30 and October 3, despite the escalating Sino-US trade dispute gnawing at confidence on corporate profit growth through most of the year. She said they also fear that company profit margins will be squeezed by rising costs, including the price of oil.
USA stocks plunged to their worst loss in eight months on Wednesday as technology companies continued to drop.More news: Minnesota health officials on the lookout for rare nervous system disorder
"The market is starting to believe the Federal Reserve a bit more and starting to price [rate hikes] in", Mona Mahajan, US investment strategist at Allianz Global Investors, told The Post.
Stocks and bonds traditionally have been in a tug of war for capital, but for the past 10 years bonds have had one arm tied behind their back, said Jack Ablin, chief investment officer and founding partner at Cresset Wealth Advisors in Chicago.
Is the dip hitting other markets?
"The fundamental environment, though, remains supportive of share appreciation".
The S&P/NZX 50 index declined 19.16 points, or 0.2 per cent, to 9050.82.
COMMODITIES: Benchmark U.S. crude oil fell 60 cents to $74.36 per barrel.
The CAC 40 in France dropped 1.5 percent, Germany's DAX lost 1.2 percent and the FTSE 100 in London slipped 0.4 percent.
Rising costs, as inflation and borrowing rates pick up, could also be a worry for stock markets. Investors see many of these countries as being vulnerable to higher U.S. interest rates, which can pull away investment dollars. Brent crude, the worldwide standard, lost 2.2 per cent to $83.09 a barrel in London.
There were, however, slight lifts for Japan's Nikkei, which added 0.2 per cent, and Hong Kong's Hang Seng, which gained 0.2 per cent.More news: Google Abandons Bid for $10B Pentagon Cloud Contract