Wall Street dived from the previous session’s heights as volatility ramped up on global markets.

US stocks plunged, with the S&P 500 index erasing its biggest rally this year, on concern weak growth in Europe will hurt America’s economy and as the end to the US Federal Reserve stimulus program draws near.

The US Fed will end its long running bond buying program this month. Quantitative easing in its current form has injected trillions of dollars into the US economy since December 2012 and helped prop up share markets.

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Share market losses accelerated after the European Central Bank’s president Mario Draghi said there are signs the eurozone’s economic growth is slowing and policy makers need to do more to lift inflation from an “excessively low” level.

On top of this, German exports fell sharply in August, as a later school holiday, sanctions against Russia and uncertainty over Ukraine led to the largest monthly drop in five years.

Germany’s Federal Statistical Office reported exports fell 5.8 per cent compared with July, while imports fell 1.3 per cent.

This follows weak industrial output figures published earlier this week.

The Chicago Board Options Exchange Volatility Index, which essentially measures fear in the market, spiked 23 per cent to 18.5, which is its highest level since February.

By the close, the Dow Jones Industrial Average lost 335 points, or 2 per cent, to 16,659.

The S&P 500 index fell 2.1 per cent, or 41 points, to 1,928.

The Nasdaq Composite dropped 2 per cent to 4,378.

Shares in aluminium producer Alcoa lost 4.3 per cent, despite the company kicking off US earnings season with a slightly better-than-expected third quarter profit number.

Alcoa reported a profit of $US149 million, or 12 cents a share, up from $US24 million, or 2 cents a share, a year earlier.

Energy shares also took a hit after crude oil prices slipped.

West Texas Intermediate crude dropped 1.2 per cent to $US86.06 a barrel, while London’s Brent crude briefly retreated below $US90 for the first time since June 2012.

Across the Atlantic, the selling was driven by worries about growth in the eurozone.

London’s FTSE 100 index closed at its lowest level this year – off 0.8 per cent to 6,432.

Frances’s CAC shed 0.6 per cent to 4,141 and Germany’s DAX bounced back 0.1 per cent to close at 9,005.

At 7:30am (AEDT) in Australian futures trade the SPI 200 was 58 points, or 1.1 per cent, lower.

The Australian dollar was buying close to 87.79 US cents. It was also worth 69.18 euro cents, 94.77 Japanese yen, 54.46 British pence and $NZ1.1165.