The Dow Jones Industrial Average (DJIA) fell more than 500 points, as investors sold heavily on fears that growth across the globe, particularly China was showing a disturbing trend.
The Dow Jones fell 530 points to close at 16,459 points and is now trading with losses for the year. The S&P 500 also plunged more than 3 per cent and closed at 1979.89, down 64.84 points.
The single biggest reason for the fall was the sharp slowdown in growth rate in China, which is a major market for companies from US to Europe.
The Chinese PMI data which was reported on Friday was weaker than reported confirming trends of a sharp slowdown.
The other reason for the sharp fall was the slump in commodity prices, including oil and fears that the US Federal Reserve may hike interest rates in Sept.
Markets may open lower once again next week as the trend is likely to continue.