The dread that gripped equity markets earlier in the week re-emerged Thursday as U.S. stocks plunged on concern that rising interest rates will drag down economic growth.

The Dow Jones industrial average plunged 1,032 points, or 4.1 percent, to 23,860. That's 10 percent below the record high it set just two weeks ago, putting it in what is known on Wall Street as a "correction."

The Standard & Poor's 500, the benchmark for many index funds, is also 10 percent below the record high it set two weeks ago. The S&P 500 gave up 100 points, or 3.8 percent, to 2,581. The Nasdaq lost 274 points, or 3.9 percent, to 6,777.

Worries about inflation set the market rout in motion last Friday, and many market watchers have been predicting a pullback after the market's relentless march higher over the past year.

Traders remain on edge after the resurgent threat of inflation and higher bond yields helped trigger the burst of volatility and a pullback across the overheated global equity market.

Bulls may have to question the wisdom of buying the dip when more selling by speculators may be imminent. This week's Treasury auctions have underwhelmed, raising the possibility that the debt selloff could steepen. Investors are also facing the prospect of Fed tightening, which could cool growth.

"There's some big-money players that have really leveraged to the low rates forever, and they have to unwind those trades," said Doug Cote, chief market strategist at Voya Investment Management. "They could be in full panic mode right now."