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In short:
Global financial markets have fallen on fears the US is heading toward a recession.
The tech-heavy NASDAQ lost 2.43 per cent on on Friday, local time, and is now in technical correction.
What's next?
Analysts say further economic and financial markets weakness could put pressure on central banks to ease monetary policy.
There are genuine concerns the world's largest economy is heading toward a recession, and the fear is gripping global financial markets.
Thursday night's official US jobless claims figures showed a surprising number of Americans out of work.
Separate figures showing a weak manufacturing sector added to worries about the US economy.
The news sent global financial markets into a tailspin Friday, on fears the US economy was on track for what is known as a hard landing.
"A [sharemarket] correction is underway," AMP's head of investment strategy Shane Oliver said.
It followed weeks and months of an incredible run-up in stock prices in the US and in Australia.
"Shares went sky high into July on the back of better news on inflation, increasing optimism about lower interest rates ahead and optimism about IT and AI-related earnings," Mr Oliver, who manages $3 billion in investments, said.
The US Federal Reserve announced late this week it was leaving official interest rates unchanged at between 5.25 per cent and 5.5 per cent.
At the time it was seen as "good news", given chairman Jerome Powell's qualified commitment to lowering interest rates in September.
However, investors later questioned whether this was a policy mistake given the weaker-than-expected economic data, suggesting the Federal Reserve chair should have already cut interest rates.
The problem is that, like Australia, the Federal Reserve is reluctant to cut interest rates until it sees further evidence inflation is cooling.
The fear at the heart of this share market plunge is that the US central bank has lifted interest rates too high for too long.
"The [benchmark] ASX 200 surged above 8,100 index points mid-week, helped by lower-than-feared inflation and a boost from rising Fed easing [interest] prospects," Dr Oliver said.
"But the gains were reversed [on Friday] as global growth worries left the market up just 0.3 per cent or so for the week, with falls in financial, health and material stocks mostly offsetting the gains in all the other sectors."
Bond yields fell sharply, reflecting expectations for lower interest rates along with safe haven demand.
The yield on the US 10 Year Treasury bond, for example, had dived to 3.79 per cent by early Saturday morning, Australian eastern time.
It had been trading at 4.2 per cent earlier in the week.
Share investors often flee to the relative safety of bonds when the share market wobbles, which increases the prices of bonds and lowers the interest rate on them.
Bond yields move inversely to prices
Overnight US share markets were again overwhelmed by selling activity.
And, again, it was weaker economic news that had investors more bearish.
US payroll data showed the unemployment rate climbing to 4.3 per cent — the highest rate since 2021.
Non-farm payrolls grew by just 114,000 last month, the Labor Department reported, a slowing from 179,000 jobs added in June and below the 185,000 expected by economists polled by Dow Jones.
It is further evidence the US economy may be in trouble.
US stocks fell heavily on the assumption demand in the economy is set to dive.
The broad market index dropped 1.84 per cent to end at 5,346.56.
The Nasdaq Composite (which houses the big technology stocks) lost 2.43 per cent to close at 16,776.16, bringing the decline for the tech-heavy index from its recent all-time high to more than 10 per cent.
It means the Nasdaq has entered a "technical correction".
The Dow Jones Industrial Average fell 610.71 points, or 1.51 per cent, to finish at 39,737.26.
At its session low, the 30-stock index was down 989 points.
"Our view remains that lower interest rates will boost shares on a six to 12 month, view assuming recession is avoided," Dr Oliver said.
"However, in the next few months global and Australian shares look vulnerable to further falls, suggesting that it's too early to buy the dip just yet as: valuations are stretched; investment sentiment looks somewhat optimistic; recession risk is high; there has been a heavy reliance on tech shares to keep the key US share market going.
"And geopolitical risk is high particularly around the US election but also around the Middle East, with increasing risks of escalation in the Israel war to include Hezbollah and Iran with risks to oil supplies."
Marcus Today market analyst Henry Jennings said, fundamentally, global investors had been spooked by the prospect of a US recession.
"US 10-year yields (interest rates) have fallen below 4 per cent," he said.
"The economic data flashes a warning on the economy and recession talk is back again.
"Earnings (or company profit announcements in the US) have failed to deliver in places and the bullishness has been replaced very quickly with negative volatility.
"Japan is under serious pressure, also denting sentiment in the region, with some spillover expected."
"We are being tossed around on a sea of volatility and new worries," he added.
Those new worries though could bring about lower interest rates sooner than expected both in the United States and in Australia.
Jamieson Coote Bonds co-founder Angus Coote said sustained share market selling pressure and its impact on the economy would give the Reserve Bank pause for thought.
"I think the earliest [RBA interest rate cut] is November," he said.
"I would say it would have to be relatively extreme on share markets for the RBA to consider cutting rates before November but it's not impossible by any means."
ABC