US stocks have fallen sharply, with the tech-rich Nasdaq Composite Index sinking more than two per cent following a gloomy outlook from a leading semiconductor company.

At the closing bell on Friday, the Dow Jones Industrial Average stood at 16,544.14, down 115.11 points (0.69 per cent) and erasing the blue-chip index’s gains for 2014.

The broad-based S&P 500 tumbled 22.16 (1.15 per cent) to 1,906.05, while the Nasdaq slumped 102.10 (2.33 per cent) to 4,276.24.

The retreat in US stocks followed dreary action in most overseas markets amid anxiety over global growth, as the German DAX slumped 2.4 per cent and the French CAC 40 fell 1.6 per cent.

Microchip Technology, whose semiconductors are used in electronics products, sank 12.3 per cent as it slashed its revenue forecast for the upcoming quarter, due in part to poor performance in China.

The firm’s chief executive, Steve Sanghi, said the decline is part of a correction that “will be seen more broadly across the industry in the near future.”

Other semiconductor stocks suffered big drops, including Micron Technology (-9.1 per cent), Texas Instruments (-7.0 per cent) and STMicroelectronics (-6.0 per cent).