The Dow Jones industrial average dropped 332 points, or 1.9 per cent, to 17,662 Tuesday.
The Standard & Poor's 500 fell 35 points, or 1.7 per cent, to 2,044. The Nasdaq composite lost 82 points, or 1.7 per cent, to 4,859.
The prospect of higher U.S. rates helped send the euro sharply lower against the dollar. The euro fell to its lowest level in 12 years.
Bond yields for several European countries hit record lows after the European Central Bank started its bond-buying program.
Barnes & Noble plunged 10 per cent after reporting earnings that fell far short of analysts' forecasts.
Oil fell $1.71 to $48.29 a barrel in New York.