Chinese markets fell despite unexpected strongly trade data Thursday.
Major U.S. indexes set their latest record highs just two weeks ago.
"Ten percent is the theoretical correction", said David Lutz of Jones Trading. The Nasdaq has lost 9.7 percent of its value in the same span, falling short of the 10 percent threshold that defines a stock correction. If the S&P declines 20% at any point in the day, trading is called off for the day. Combine that with Friday's losses, and the total loss was roughly 6% in two days.
The sharp moves this week have raised questions about how quickly investors would be willing to buy stocks at lower prices or stay cautious amid the threat of higher inflation. Brent crude, the benchmark for global oil prices, lost 76 cents, or 1.1 percent, to $66.86 a barrel in London.
The market's main gauge of volatility, the CBOE Volatility Index, opened at a relatively elevated 32.18 on Friday, almost three times what it was a week ago but lower than a two-and-a-half-year high of 50.30 points hit on Tuesday.
US equity indexes fluctuated on Tuesday after a tumultuous morning that saw the Dow Jones Industrial Average swing more than 900 points in 25 minutes. What's more, it was the fourth massive drop for the Dow in six sessions - something we haven't seen in two years - and the first time since the financial crisis that the index gave up 1.5% or more in back-to-back sessions.
"In the absence of recession, a deep bear market is unlikely", he said.
In other words, the current drop has not even hit "correction" territory yet, which is a 10% drop from market highs.
'While rising oil prices and hard landing concerns around China have failed to spook markets, fears that rising inflation may force policymakers into hiking rates quicker than predicted seems to have triggered the recent panic, ' he says. South Korea's Kospi declined 2.9 percent to 2,418.70 and the Shanghai Composite index was off 2.2 percent at 3,412.55.
USA crude oil fell 76 cents, or 1.2 percent, to close at $63.39 a barrel in NY.
On Monday, the Dow finished down 4.6 percent while the S&P 500 sank 4.1 percent. But the Dow is up 24 percent in the past 12 months the S&P 500 has gained 18 percent. The Nasdaq Composite soared 148 points to 7,115 - a 2.13 percent hike.
"That is not to say that we won't see further falls in coming days, but in an environment where growth is good and earnings are expected to rise globally, there are decent underpinnings", said James Knightley, chief global economist at ING.
In currency trading, the dollar fell to 109.02 yen from 109.54 yen late Tuesday. Japan's Nikkei 225 index was an exception, although it ended trading flat, gaining a mere 0.16 per cent. The euro was trading at $1.2384. Falls like this have not been registered since August 2011 when investors were fretting over Europe's debt crisis and the debt ceiling impasse in Washington that prompted a US credit rating downgrade.