U.S. Steel rose $2.50, or 5.7 percent, to $46.01.
Industrial companies like Boeing and Caterpillar that use steel and aluminum fell sharply, as did exporters like Apple whose overseas sales could be hurt by a trade war. The S&P 500 slid 31 points, or 1.1%, to 2,714.
That drove shares in US steel producers as much as 12 percent higher but knocked 2 percent or more off heavyweights like Boeing and Caterpillar, who investors anxious would face higher raw material costs and trade barriers elsewhere.
The worst performing sectors were energy, materials, and health care down 2.2%, 1.7%, and 1.5%, respectively.
Coming after the 0.4% fall in the ASX 200 in February, Thursday's 0.7% fall, March is already looking as though it will be in the red by more than 1.5% after just two days trading.
Booking Holdings Inc (BKNG.O), formerly known as Priceline, rose 6.8 percent after reporting upbeat quarterly profit, helped by higher hotel bookings, while off-price apparel seller TJX (TJX.N) jumped 6.9 percent after posting upbeat same-store sales.
U.S. 10-year treasury bond (UST) yields have fallen for the third consecutive day to 2.864 per cent.More news: CAUGHT: CMU student wanted for fatal shooting of parents arrested
On Tuesday, Powell gave an upbeat view on the US economy and said data had strengthened his confidence on inflation.
Detrick also said that investors were anxious aboutretaliatory tariffs from China. Some investors took that as a signal that the Fed may get more aggressive on rate increases, which sent stocks down and Treasury yields higher. His address to congress signalled the Fed will keep raising interest rates to contain inflation.
"It's helping about a dozen stocks in those industries but has raised the specter of trade wars, and trade wars don't help the stock market".
Patterson Companies fell to the biggest loss in the S&P 500 after it reported weaker earnings for the latest quarter than analysts expected and said that its chief financial officer was leaving. Benchmark U.S. crude fell 49 cents to $61.19 per barrel. Brent crude, the global standard, lost 90 cents to $63.83 a barrel.
The April gold contract was down US$12.70 to US$1,305.20 an ounce and the May copper contract was down one cent to US$3.12 a pound.
The dollar dipped to 106.24from 106.66 yen late Wednesday.
France's CAC 40 fell 1.1 percent and Germany's DAX was down 2 percent.
European markets closed mostly lower: London's FTSE 0.1 per cent, Paris closed flat and Frankfurt was 0.3 per cent lower.