The delayed reaction in the US came a day after the US Federal Reserve raised the federal funds rate by 50 basis points and Fed chairman Jerome Powell said there were more half-a-per-cent rate increases to come over the next couple of months. 

Traders raised their bets of a 75-basis-point rise in June, even though Mr Powell all but ruled that out. 

Rising interest rates, the war in Ukraine, COVID-19 lockdowns in China are all weighing on investor confidence. 

The Dow Jones Industrial Average plunged 3.1 per cent, to 32,998, the S&P 500 dropped 3.5 per cent, to 4,147, and the Nasdaq plummeted 5 per cent, to 12,318, reversing yesterday's rally. 

That's the lowest level for the Nasdaq since November 2020 and the lowest for the Dow since October 2020. 

All 11 major S&P industry sectors declined, with consumer discretionary stocks leading the falls. 

The VIX volatility index climbed to 31.20 points. 

Big tech companies were sold off — including Google, Apple, Microsoft and Amazon — because higher interest rates will increase their borrowing costs, and tech firms have relied on cheap finance to expand. 

That saw $1.3 trillion ($1.8 trillion) wiped off the value of the world's biggest technology firms. 

Payments firm Block plummeted to a first-quarter loss as cryptocurrency bitcoin prices declined.

Block made a net loss of $US204 million, or 38 US cents a share, compared with a profit of $39 million a year earlier. 

Its shares lost 10 %, but it regained ground in after-hours trade, as investors examined the results in more detail and liked what they saw. 

Twitter was one of the few stocks to rise after billionaire Elon Musk lined up a diverse group of investors to back his $US44 billion takeover bid for the social media platform. 

Among them are Oracle co-founder Larry Ellison and a Saudi Arabian prince. 

Documents also show that Mr Musk is in talks with Twitter founder Jack Dorsey to sell some of his shares to Mr Musk. 

ASX plunge:

Australian shares fell sharply in morning trade after the Wall Street rout, with just five stocks rising on the ASX 200 at midday.

At 12pm AEST,  the All Ordinaries was down 2.6 per cent, to 7,441, and the ASX 200 fell 2.5 per cent, to 7,180, with every industry sector in the red, led by technology and healthcare stocks. 

Burman Capital chief investment officer Julie Lee said $65 billion had been wiped from the value of the market so far today. 

"The reason why those sectors are hit the hardest is because of the rising interest rate environment makes growth much harder to achieve," Ms Lee said. 

"So, in the tech space, where we are seeing some companies still unprofitable, that is being hit hard because future growth is being discounted." 

The biggest loser on the ASX 200 was News Corporation down 1.2% after it released its quarterly profit result, and the best performer of the five stocks that rose was medical device firm Polynovo up 4%.

Taking a big hit today on the market were real estate firms REA Group down 6% and Domain down 3.4 %, because higher borrowing costs are bad for property demand. 

REA saw quarterly revenue rise to $278 million, up from $226 million for the same time last year.

The company said the value of trial commissions would be lowered by increased mortgage run-off rates.

All the big banks were lower, despite a rising interest rate environment being good for them because it increases their revenue. 

The Commonwealth Bank (-1.9 per cent) was down the most at midday, followed by National Australia Bank (-1.5 per cent), Westpac (-1.1 per cent), and ANZ (-0.6 per cent).

Meanwhile, the Australian dollar was sold off on the worsening global and local economic outlook, dropping more than 2% overnight. 

At 11.50am AEST, the local currency fell below 71 US cents, to 70.85 US cents, after the Reserve Bank said in its latest monetary policy statement that inflation could reach 6 per cent by December.

It said further interest rate increases were needed to restrain inflation.

Bank of England rate hike:

With inflation climbing to 10% because of Russia's invasion of Ukraine and China's COVID-19 lockdowns, the Bank of England has lifted its official interest rates to a 13-year high. 

The UK central bank's Monetary Policy Commission approved a 25-basis-point rise by a majority of six to three, which took the benchmark interest rate to 1%. 

Its three dissenting members wanted a rise of 0.5% because inflation has been running at 7% in the UK due to the higher cost of goods, especially fuel.

It was the fourth rise since December.

"Global inflationary pressures have intensified sharply following Russia's invasion of Ukraine," the bank said.

"This has led to a material deterioration in the outlook for world and economic growth."

The FTSE rose 0.1%, to 7,503, the DAX in Germany dropped 0.5%, to 13,903, while the CAC 40 in Paris lost 0.4 %, to 6,368. 

Meanwhile, the pound plunged as the BOE warned about the risk of a recession. 

Oil prices jumped overnight, with Brent crude up 1%, to $US111.19 a barrel, while spot gold was down 0.2%, to $US1876.84 an ounce.

Sources | ABC / Reuters