Wall Street plunged Tuesday as a heavy sell-off in China's stock markets pushed down the global equity dominos.

The Dow Jones industrial average fell 546 points, or 4.3 percent, to 12,086.06 in the low session at about 3 p.m., the worst decline since Sept. 17, 2001, the first trading day after the terror attacks, when the blue chips closed down 684.81, or 7.13 percent.

With all 30 blue-chip stocks were in the red, the Dow Jones industrial average was down 416.02, or 3.3 percent, to end at 12,216.24, losing all its gains for the year.

The S&P 500 index fell 50.33 points, or 3.5 percent, to 1,399.04, while the tech-heavy Nasdaq Composite dropped 96.65 points, or3.9 percent, to 2407.87.

European equities also posted declines following heavy sell-off in Asian markets. The FTSE 100 index lost 2.3 percent, the German DAX 30 index fell 2.3 percent while the French CAC-40 index declined 2.6 percent.

The declines in markets were triggered by a heavy sell-off on the Chinese stock market overnight, said Wei Chen, financial advisor at Morgan Stanley Global Wealth Management Group.

The Shanghai Composite Index fell 8.8 percent, the deepest plunge since Feb. 18, 1997, as the Chinese government tightened monetary policy due to overheated equity markets with the Shanghai Composite Index gaining 130 percent in 2006.

The latest economic data and former Federal Reserve Chairman Alan Greenspan's warning on U.S. economy also knocked down investor's confidence.

New orders for U.S. manufactured durable goods dropped 7.8 percent in January, the biggest one-month drop since an 8.1 percent plunge in October, according to the Commerce Department.

One day before, Greenspan warned that the American economy might slip into recession by year-end.

"The corrections are for a longer-term perspective, whatever for Wall Street or Shanghai stock market," said Wei Chen.