The Dow Jones Industrial Average tumbled 318.24 points (1.96 percent) to 15,879.11. The drop is the biggest in a day in both points and percentage terms since June 20, 2013.
The broad-based S&P 500 plummeted 38.17 (2.09 percent) to 1,790.29, while the tech-rich Nasdaq Composite Index sank 90.70 (2.15 percent) to 4,128.17.
Analysts said investors were jittery about steep drops in the Argentine peso and other emerging-market currencies.
Another concern has been a stream of middling corporate earnings reports that have suggested big companies foresee demand this year coming in lower than analysts expected.
"I still believe it's part of a correction and not the beginning of some crisis of some kind," said Jack Ablin, chief investment officer at BMO Private Bank.
Some experts estimate the stock market is 10-20 percent overvalued after the surge of 2013, Ablin said.
"I was hopeful that fundamentals would pick up," Ablin said. "But so far earnings season, while reasonable, hasn't been a huge positive surprise."
The losses were broad-based, but fell hardest on industrials like General Electric (-3.4 percent) and FedEx (-4.0 percent), materials companies like International Paper (-4.1 percent) and United States Steel (-4.0 percent), and financials like Citigroup (-2.7 percent) and JPMorgan Chase (-2.4 percent).
These segments tend to be more vulnerable to economic cycles, rising when times are better and falling when the economy slackens.
Consumer staples companies, including Costco Wholesale (-0.6 percent) and Colgate-Palmolive (-1.7 percent) sustained smaller declines.
Earnings results were also a driver, in some cases producing rare gains Friday.
Dow component Microsoft advanced 2.1 percent after reporting record revenues in its fiscal second quarter on the back of strong demand for Xbox consoles, Surface tablets and Internet "cloud" services.
Fellow Dow member Procter & Gamble jumped 1.2 percent after earnings bested expectations by a penny at $1.21 per share. The company also confirmed its full-year forecast.
But pharmaceutical company Bristol-Myers Squibb sank 5.6 percent on concerns that it is taking too long to test and develop promising cancer drugs, even as earnings bested expectations by eight cents at 51 cents per share.
Bond prices rose. The yield on the 10-year US Treasury declined to 2.74 percent from 2.77 percent Thursday, while the 30-year fell to 3.65 percent from 3.68 percent. Bond prices and yields move inversely.