Concerns that a trade deal between the United States and China may not be imminent reined in a rally in world equity markets and reversed gains on Wall Street yesterday, while strong U.S. wage growth boosted US bond yields.
Markets had earlier climbed on hopes that the world's two biggest economies were mending their shaky trade relations.
A steep decline in shares of Apple Inc further weighed on sentiment in the US stock market after the iPhone maker warned that sales during the crucial holiday quarter would likely miss expectations.
White House economic adviser Larry Kudlow told CNBC that while President Donald Trump plans to meet China President Xi Jinping later this month, he has not asked US officials to draw up a proposed trade plan, contradicting a report earlier in the day that had buoyed hopes of a trade dispute resolution.
That erased early gains in US stocks and curtailed a rally in global markets that had lifted emerging market stocks by their largest daily gain since 2016.
"The stock market is focused on tariffs and they believe that increased tariffs are going to hurt the economy," said Mike Rask, director of trading at Hodges Capital in Dallas. "There was the belief overnight that we were close to a trade deal with China and now it looks like that is not the case."
The Dow Jones Industrial Average fell 279.37 points, or 1.1 per cent, to 25,101.37, the S&P 500 lost 27.22 points, or 0.99 per cent, to 2,713.15 and the Nasdaq Composite dropped 94.35 points, or 1.27 per cent, to 7,339.71.
Apple's shares tumbled nearly seven per cent, taking its market value below $1 trillion, after the company said sales for the final quarter would likely miss expectations.
In Europe, Germany's export-heavy DAX had jumped as much as 1.5 per cent, its best session since July, before giving up most of its gains.
The pan-European STOXX 600 index rose 0.28 per cent and MSCI's gauge of stocks across the globe shed 0.06 per cent.
US job growth rebounded sharply in October and wages recorded their largest annual gain in nine-and-a-half years, pointing to further labor market tightening that could encourage the Federal Reserve to raise interest rates again in December.
Benchmark 10-year notes last fell 14/32 in price to yield 3.1969 per cent, from 3.144 per cent late on Thursday.
The dollar index, tracking the greenback against six major currencies, rose 0.25 per cent, with the euro down 0.2 per cent to $1.1384.
Oil prices were weighed down by a report that the US government has agreed to let eight countries, including close allies South Korea and Japan, as well as India, to keep buying Iranian oil after Washington re-imposes sanctions.
US crude fell 0.75 per cent to $63.21 per barrel and Brent was last at $72.96, up 0.1 per cent on the day.