The S&P 500 and Dow Jones fell by 1.82% and 1.78%, respectively, after news arose that US President Donald Trump tried to interfere with the investigation into the allegations against former National Security Advisor Michael Flynn.
Banks, which soared in the months since the election, slumped.
OIL: Benchmark U.S. crude was up 45 cents, or 0.9 percent, at $49.11 per barrel in NY. The dollar dropped to 111.11 yen from 113.03 yen. Secondly, and more drastically, it could actually lead to the impeachment of the sentient Wotsit, an eventuality that would completely erase the foundations of the market's recent record highs.
The White House denies both claims, but that hasn't stopped the market from reacting. The decline puts the S&P 500, and the Nasdaq indexes on pace to post their biggest one-session drops since March 21.
The financial sector closed down 3% while the technology sector fell 2.8%.
The bull market is not over by any means, but between the political stuff and the fact that the next earnings season is three months away, theres going to be a lack of motivation, said Donald Selkin, chief market strategist at Newbridge Securities in NY. The S&P/TSX composite index, while starting the day with more subdued losses, joined the stock market plunge fully by mid afternoon, dropping by about 250 points, or 1.6 per cent.
Shares in Asia traded weaker on Thursday as opening drama hit sentiment after U.S. Justice Department Deputy Attorney General Rod Rosenstein appointed former FBI director Robert Mueller as special counsel to take over the investigation of Russia's alleged interference in the U.S. presidential election.
It's always easy to blame what's happening in financial markets on the biggest headline of the day.More news: GOP candidate for FBI says no special counsel for inquiry
Bank stocks, which outperformed in the post-election rally, were the worst hit on Wednesday.
Benchmark U.S. crude rose 41 cents, or 0.8 percent, to close at $49.07 per barrel in NY. The precious metal jumped 1.8 percent, climbing $22.30 to settle at $1,258.70 per ounce.
Gold prices enjoyed a big day amid the stock and dollar sell-off, with June-dated futures notching their highest close of the month and a sixth straight win. Treasury bonds were little changed, the dollar was mostly stronger, gold lost 0.5% snapping a six-day winning streak and oil gained 0.6%.
The pound rose above 1.30 against the U.S. dollar for the first time since September, as strong United Kingdom retail sales gave a boost to sterling and jitters surrounding calls for Donald Trump's impeachment weighed on the greenback.
In Europe, Germany's Dax fell 1.4%. The FTSE 100 index of leading British shares dipped 0.2 percent.
Polcari added he expected the market to fall even further.
A woman walks past an electronic stock board showing Japan's Nikkei 225 index and Japanese yen-U.S. dollar daily exchange rate at a securities firm Thursday, May 18, 2017, in Tokyo.
-The Bloomberg Dollar Spot Index dropped 0.5 percent, trading at the lowest level since November 8. Brent crude, used to price global oils, gained 56 cents, or 1.1 percent, to close at $52.21 per barrel in London.