All three main indexes in New York suffered hefty selling but the tech-heavy Nasdaq led the way with global titans such as Apple, Microsoft, Amazon and Facebook among the worst hit.
And the red ink flooded into Asia Friday, with tech firms again the whipping boys.
Hong Kong, Shanghai, Seoul, Taipei, Singapore, Jakarta and Wellington all sank more than one percent, while Sydney dropped more than two percent and Tokyo one percent.
The drop had been expected after the Nasdaq climbed around 80 percent from its March trough, with analysts warning that valuations were growing increasingly out of sync with economic realities -- Tesla has risen nearly 500 percent in the time and Apple more than 120 percent.
The rally had been propelled by expectations for strong earnings growth next year following fiscal and monetary stimulus measures and as the world economy recovers from the virus crisis.
"Given the market's seemingly relentless climb higher on the back of the mega-cap tech names, it should be no surprise that a pullback was in the offing as the market became increasingly extended and overbought," Quincy Krosby, at Prudential Financial Inc, said.
This could be "an overbought market that is burning off froth, following end-of-the-month portfolio adjustments as managers needed to catch up".
Observers said September has historically been a bad month for stocks and that while recent economic data had not been brilliant, it was not bad enough to spark such a sell-off.
And with central banks promising to back up financial markets for the foreseeable future, there are no expectations of a calamitous drop such as that seen in March or the tech bubble crisis two decades ago.
"Corrections are to be expected -- a market fuelled by central bank largesse, economic surprises and record earnings beats in the last few months was never going to maintain its heady pace forever," said JP Morgan Asset Management strategist Kerry Craig.
"When it comes to the tech sector and the other online giants that have gained so much in the last few months, there could be profit-taking as we head towards the US presidential election in November.
"Negative headlines on potential regulatory and tax changes are likely to add to investor unease in a market with elevated valuations."
Rodrigo Catril, at National Australia Bank, added "Now the question is whether the correction has legs or whether investors are tempted back in."
Investor focus is now on the release later Friday of government jobs data, which will provide the latest snapshot of the world's number one economy.
Economists expect to see a surge in employment and a drop in the jobless rate to below 10 percent. The closely watched jobless claims report Thursday showed a bigger-than-forecast fall below one million.
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: DOWN 1.0 percent at 23,240.95 (break)
Hong Kong - Hang Seng: DOWN 1.8 percent at 24,554.48
Shanghai - Composite: DOWN 1.4 percent at 3,336.08
Euro/dollar: UP at $1.1856 from $1.1854 at 2050 GMT
Dollar/yen: DOWN at 106.14 yen from 106.17 yen
Pound/dollar: UP at $1.3292 from $1.3280
Euro/pound: DOWN at 89.19 pence from 89.26 pence
West Texas Intermediate: DOWN 0.7 percent at $41.07 per barrel
Brent North Sea crude: DOWN 0.6 percent at $43.79 per barrel
New York - Dow: DOWN 2.8 percent at 28,292.73 (close)
London - FTSE 100: DOWN 1.5 percent at 5,850.86 (close)