NEW YORK, New York - Inflation fears punctured U.S. stocks on Friday with the industrial indices having their worst day in a month.
The U.S. dollar conversely had one of its best days, crushing all the major currencies in its wake.
The CBOE volatility index jumped to 20.60 points, its highest level since May 21, before slipping back slightly following remarks by U.S. Federal Reserve official James Bullard that inflation was rising more than anticipated.
"It may indicate that inflation is becoming a concern for the Fed," Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey told Reuters Thomson Friday.
"Second, it suggests that tightening could crimp the growth of the economy and the earnings of the S&P 500 sooner than investors thought."
The Dow Jones led the selling charge, plummeting 533.37 points or 1.58 percent to 33,290.08.
The tech-laden Nasdaq Composite gave up 130.97 points or 0.92 percent to 14,030.38.
The Standard and Poor's 500 was stripped of 55.41 points or 1.31 percent to 4,166.45.
The foreign currency markets were active with the dollar in demand across the board. The euro tumbled to 1.1870 approaching the New York close Friday. The British pound dropped to 1.3813. The Japanese yen declined to 110.15. The Swiss franc fell to 0.9219.
The Canadian dollar was friendless at 1.2430. The Australian and New Zealand dollars dived to 0.7496 and 0.6941 respectively.
The carnage in the UK and Europe was even greater. London's FTSE 100 tumbled 1.90 percent. The German Dax crumbled by 1.78 percent. In Paris, France, the CAC 40 was down 1.46 percent.
On Asian markets, the Australian stock market made some headway Friday, with the All Ordinaries rising 23.80 points or 0.31 percent to 7,624.30.
In Japan, however, stocks were sold off. The Nikkei 225 fell 54.25 points or 0.19 percent to 28,964.08.
In China, the share market was flat with the Shanghai Composite inching down 0.51 of a sing point or 0.01 percent to 3,525.10.
The best performer was the Hang Seng in Hong Kong which advanced 203.99 points or 0.71 percent to close at 28,762.58.