The Dow finished the day down by 1,032.89 points, or 4.15% at 23,849.23. Heavy selling in the U.S. Treasury market caused the 10-year yield to spike to 2.85 percent last week, worrying Wall Street about inflation and faster rate hikes from the Federal Reserve.
The Dow Jones Industrial Average closed at 24,893.35 for a loss of -19.42 points or -0.08%.
Trading has been turbulent all day.
ASX futures have dropped by 64 points, or 1.2 per cent, which points to a steep tumble for Australian shares this morning.
The Cboe Volatility Index, known as the VIX and the most widely followed barometer of expected near-term volatility for the S&P 500, also hovered between positive and negative territory, a day after it hit its highest level since 2015.
In another dramatic trading session finishing this morning, Wall St confirmed a correction for the market that has thrown its almost nine-year bull run off course.
Two of the US stock market's three major indexes are in correction territory now.
Some strategists view it as a healthy pullback after a rapid run-up over the previous year and say the improving economic outlook is a positive for stocks overall.
Despite the big swings, Tuesday's trading looked similar to the patterns that have shaped the market for the a year ago: investors bought retailers like Amazon and Home Depot and technology and industrial companies and banks, which do better when economic growth is strong.
The S&P 500 index showed 2 new 52-week highs and no new lows, while the NASDAQ recorded 13 new highs and 21 new lows. On Tuesday it rallied another $5.57, or 15.6 percent, to $41.19. The surge in volatility on Monday, which sent the VIX spiking to multi-year highs in just hours, led to the implosion of products created to bet against volatility, exacerbating markets stresses in a rapid unwind. Rising bond yields, he notes, are a sign of economic strength.
Boston-based LPL Research released a report titled "Volatility is Back", which pointed to fear of rising interest rates as the source of the recent swings but cautioned that the economy is fundamentally strong.
Investors fear that low unemployment, increasing US growth and rising wages will spur the Federal Reserve to raise interest rates, which would boost the cost of borrowing money.
Scott Wren, senior global equity strategist for Wells Fargo Investment Institute, said investors are anxious that the higher wages could eat into corporate profits, and that the Fed could "make a mistake" and raise rates too quickly.
Tech stocks are leading the market rebound Tuesday.
On Thursday, the Bank of England seemed to offer support for that view.
Peter Brown, of the Institute of Investing and Financial Trading, said the fact that there was a correction was not hugely surprising. They also experienced corrections. Investors worry stimulus from the tax cuts and the added government spending will overheat an already strong economy, pushing up wages and prices and sparking inflation. The Dow Jones registered its biggest one day fall in six years last night wiping out all the gains made on the index so far this year. Brent crude, the benchmark for worldwide oil prices, lost 76 cents, or 1.1 percent, to $66.86 a barrel in London.
Nine times since the bull market began in 2009 have equities experienced stretches as gruesome as this one; each time the end of the world was averted. Heating oil dipped 3 cents to $1.99 a gallon. Natural gas gave up 1 cent to $2.70 per 1,000 cubic feet.
"Now that everybody is on edge, you're going to see the volatility swing in both directions". Rate-sensitive utilities, down 1.5%, led decliners.
The pan-European FTSEurofirst 300 index rose 2.02 percent and MSCI's gauge of stocks across the globe gained 0.06 percent.
In other commodities trading, copper fell 3 cents to $3.19 a pound.