Wall Street stocks have plunged, with major indices losing more than three percent in a selloff prompted by the sudden jump in US interest rates.

When all the dust settled after a brutal session, the Dow Jones Industrial Average had lost 3.2% or 830 points to finish at 25,498.74, in the biggest fall since February.

The broad-based S&P 500 slumped 3.3% to end at 2,785.68, while the tech-rich Nasdaq Composite Index plummeted 4.1% to finish the session at 7,422.05.

The Nasdaq decline was its worst in percentage terms since the surprise Brexit vote in June 2016.

Losses were fairly broad-based, with tech companies Amazon and Microsoft 6.2% and 5.4% down respectfully.

Apple, Boeing, Nike and Visa all tumbled more than 4%, while Caterpillar and 3M lost almost 4%.

US stocks notched solid gains in the third quarter as investors brushed aside worries about trade wars and focused on strong corporate earnings and solid US economic data.

However stocks have been under pressure since the yield on ten-year US Treasury bonds jumped above 3% last week, a sudden move that raised fears of an overheating economy, speeding inflation and more aggressive Federal Reserve interest rate increases.

US President Donald Trump has described the selloff as a long-awaited "correction", and described the move by the Federal Reserve to raise interest rates as "crazy".

Mr Trump's use of the word "correction" to describe the selloff could be significant.

A stock market correction is defined as a fall of at least 10% from the high point of the last 52 weeks.

"Actually it’s a correction that we've been waiting for a long time, but I really disagree with what the Fed is doing," Mr Trump told reporters before a political rally in Pennsylvania.

"It's shifting the tectonic plates," said Jack Ablin, chief investment officer at Cresset Wealth Advisors. 

"Equity markets have enjoyed capital flows because bond yields have been so paltry. As rates move back towards fair value, capital is going to flow eventually out of equity risk taking."

The turmoil came a day after the International Monetary Fund slashed its global growth forecast on worries about trade wars and weakness in emerging markets.

Tom Cahill of Ventura Wealth Management said investors were also unnerved by remarks from luxury company LVMH of a crackdown on some goods in China amid the country's bitter dispute with the United States.

"Two weeks ago this kind of news would not have affected the market," he said. "But since we are now in a corrective phase, any bad news accelerates the decline."

LVMH's travails also raised worries about whether the prospects of luxury brands are fading as the global economic outlook weakens.

Among American brands, Tiffany slumped 10.2% and Michael Kors Holdings fell 7.1%.

US airlines were another big loser, with American Airlines sliding 5.8% and Southwest Airlines 3.6% as a major US hurricane caused flight cancelations in Florida.